How to Figure out Dow Jones Earnings

The Dow Jones Industrial Average – known as “the Dow” or “the Dow Jones” – is an index that tracks the stock prices of 30 large “blue-chip” corporations in the United States. Investors follow the widely-reported Dow Jones’ price level to gauge the performance of the overall stock market, but you can also assess the total earnings of the 30 underlying companies. Because investors view these companies as bellwethers that reflect the state of the economy, their earnings performance provides insight into the strength of corporate profits in the U.S.

Step 1

Visit any financial website that provides stock information. Click on the Dow Jones Industrial Average price quote to bring up its main quote page.

Step 2

Find out the 30 companies that comprise the Dow Jones Industrial Average. These are typically listed on the Dow Jones’ main quote page or in the “Components” section.

Step 3

Visit the investor relations section of each company’s website and download its most recent Form 10-Q quarterly report. Alternatively, you can download each company’s Form 10-Q from the U.S. Securities and Exchange Commission’s online EDGAR database.

Step 4

Locate the income statement in each quarterly report. Identify the net income and earnings per share, or EPS, at the bottom of each income statement. Net income is the total amount the company earned during the quarter, while EPS is the amount it earned for every share of common stock outstanding. Amounts shown in parentheses designate negative earnings, or a net loss. For example, assume hypothetical Company A had $2 billion in net income and $1.50 in EPS, while Company B had a net loss of $100 million and lost 50 cents per share.

Step 5

Add each company’s net income and subtract any net losses to determine the Dow Jones’ total earnings. In this example, subtract $100 million from $2 billion to get $1.9 billion in total earnings for the two hypothetical companies. Add the earnings from the remaining 28 companies to your result to figure the total.

Step 6

Add each company’s EPS and subtract any losses per share to figure the total earnings the companies generated per share. Concluding the example, subtract 50 cents from $1.50 to get $1 in EPS for the two hypothetical companies. Add the other 28 companies’ EPS to your result to calculate the total.

Tip

  • Compare the Dow Jones’ earnings with those of previous quarters to identify any trends. Rising earnings in these stocks are typically good for the stock market in general. For example, the market would likely view a quarterly per-share increase in the Dow’s earnings from $28 to $29 as a good sign.

Photo Credits

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.