Year-to-date is a term that often comes up when firms release mid-year earnings figures. Year-to-financial numbers, which include not only earnings but also sales, expenses and other key parameters, allow investors and management to determine if the firm is on track to accomplish long-term targets. When evaluating corporate earnings, it is important to understand what period they cover.
Year-to-date earnings refer to the total earnings of a firm from Jan. 1 until a specified date. Year-to-date earnings as of June 30, for instance, would cover the first half of the year, from the first day January until the last day of June. The words earnings and profits are used interchangeably in financial lingo. Therefore, year-to-date earnings and year-to-date profits mean the same thing.
When reading such figures in the financial media, it is important to notice that there is always a delay in reporting. Firms need several weeks to prepare financial reports and verify their accuracy. Therefore, when earnings are reported they are naturally somewhat dated. You may, for instance, read an article published on Oct. 20, talking about the year-to-date earnings of a particular firm based on the figures reported as of Sept. 30. The period covered by the year-to-date earnings is Jan. 1 to Sept. 30. Do not assume that because these figures cover Jan. 1 to Oct. 20, because they were published by the firm and broadcast by the media on Oct. 20.
The year-to-date figures are important as they allow you to assess how the firm has done so far compared to the same period last year or prior years going further back. By comparing the earnings during Jan. 1 to June 30, 2012 to the earnings during Jan. 1 to June 30, 2011, you can get a good idea of how the full year 2012 earnings will look compared to the previous year. Publicly-traded firms publish earnings figures four times a year, the end of March, June, September and December. This schedule allows investors to check the firm's progress frequently, avoiding big year-end surprises.
Full Year Projections
Most firms experience some kind of seasonality in their demand and supply patterns. In other words, business tends to fluctuate based on the time of year. A toy manufacturer may have far higher weekly sales around the holidays, while an ice-cream maker would sell much more during summer. Therefore, exercise caution when estimating full year earnings based on year-to-date figures. To assume that a toy manufacturer, which made only $1 million between Jan. 1 and June 30, will continue to earn at the same pace and make another $1 million between July 1 and Dec. 31 would likely be a serious mistake.