Hi, I have a question about converting quarterly EPS figures to annual EPS figures. (This could be really dumb, but just bear with me.) Let’s say you’re a retailer who is buying back shares. In Q1, Q2, and Q3, your NI just happens to match your average outstanding shares, giving you an EPS of $1.00 in each of these quarters. In Q4, you have big sales, and end up with an EPS of $4.00. Summing these quarterly EPS figures up gives us $7.00 in EPS for 2007. However, taking the total income (900) divided by the average of the shares outstanding for the year (150) gives you only $6.00 in EPS. Here is the data. Date____Q1____Q2_____Q3_____Q4____Total or average NI____200____167____133_____400____= 900 (total) Avg Sh_200____167____133____100____= 150 (avg) EPS___$1.00__$1.00___$1.00___$4.00____= $6.00 I’m guessing the problem is with how I calculated the 150 as my average outstanding share count for the year (to get an EPS of $7, I need a share count of 128.5). Anyone have any tips for dealing with this? Which answer is right–$6 or $7? Thanks!
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$6.00 is correct. You can’t simply add the EPS for each of the four quarters to get a meaningful full-year number because, as you’ve noted, the share-count in the denominator fluctuated throughout the year.
Thanks Anonymous. Seems weird there would be a discrepancy like this.
You can also think of it as the total 07 NI will equal 900 with EPS X # of shares.