Stocks That Failed The Core Earnings Test In 2Q2026

Why Is Diligence Hard to Find?

Very few investors perform proper diligence. Here’s why:

1. It requires lots of hard work, such as reading thousands of pages of financial filings, particularly the footnotes.
2. It is not exciting. How often do your hear Jim Cramer say “Diligence, diligence, diligence” like he cheers ”buy, buy, buy”?
3. It does not help sell more IPOs, especially the bad ones where bankers don’t want investors to know the truth about earnings. For example, Sweetgreen (SG), Rivian (RIVN), Gitlab (GTLB), Allbirds (BIRD), Peloton (PTON), and more.

Where To Get Diligence?

Start with Core Earnings and the Bloomberg New Constructs Core Earnings Leaders Index (BCORET:IND). This index holds stocks where deep diligence reveals businesses that are more profitable than the market realizes, i.e. Core Earnings are higher than reported net income.

How To Avoid Bad Stocks?

Most importantly, the index avoids companies that are less profitable than the market realizes, i.e. Core Earnings are lower than reported net income.

Below I detail two companies that were recently dropped from the index because their Core Earnings no longer exceed reported net income.

The Boeing Company (BA): Overstated Earnings

My firm’s Robo-Analyst AI parsed Boeing’s (BA) 2025 10-K and found billions in non-operating income that artificially inflate GAAP earnings. As a result, Boeing’s 2025 Core Earnings are much lower than the company’s reported earnings.

Boeing’s Core Earnings improved from -$7.4 billion in 2024 to -$2.6 billion in 2025. However, GAAP earnings improved much more, from -$11.9 billion to $1.9 billion, over the same time. Figure 1 shows the shift from -$4.5 billion in GAAP Earnings Distortion (Core Earnings > GAAP) in 2024 to $4.5 billion in GAAP Earnings Distortion (Core Earnings < GAAP) in 2025.

This multi-billion-dollar shift means Boeing is not as profitable as investors may think and is why it was removed from the Bloomberg New Constructs Core Earnings Leaders Index during the latest rebalance.

Figure 1: Boeing’s Core Earnings vs. GAAP Net Income: 2021 – 2025

How I Reconcile Boeing’s GAAP Earnings to Core Earnings

Below, I detail the hidden and reported unusual items that distort Boeing’s GAAP Earnings in 2025 as a real-world example of the work my firm does for all companies under coverage. I remove all of these unusual income and expense items from Core Earnings.

I provide these details so readers can audit my research and see the importance of reading 10-Ks and 10-Qs.

Boeing’s GAAP Earnings Distortion Score is strong miss and the stock earns an unattractive Stock Rating.

Boeing receives an Unattractive rating due to its negative economic earnings, return on invested capital (ROIC) of 0%, and expensive stock price.

Despite trading at $224/share, Boeing has an economic book value (EBV), or no-growth value, of -$53/share in large part because of its low ROIC and present value of total debt of $51.2 billion.

Boeing has a market-implied growth appreciation period (GAP) of greater than 100 years based on my Robo-Analyst’s default scenario in my reverse discounted cash flow (DCF) model.

Figure 2 details the differences, what I call GAAP Earnings Distortion, between Boeing’s 2025 Core Earnings and GAAP Earnings.

Figure 2: Boeing’s GAAP Earnings to Core Earnings Reconciliation: 2025

Broadridge Financial Solutions (BR): Less Than Meets the Eye

A company can earn an Attractive-or-better rating and be removed from the Bloomberg New Constructs Core Earnings Leaders Index. Regardless of overall rating, if a company’s Core Earnings are lower than its GAAP Earnings, it doesn’t earn a spot in the index. Case in point: Broadridge Financial Solutions (BR).

Broadridge Financial Solutions’ Core Earnings were greater than its GAAP earnings from fiscal 2022 to fiscal 2025. However, after I parsed the company’s fiscal 2Q26 10-Q, trailing-twelve-month GAAP earnings surpassed Core Earnings. As a result, Broadridge Financial Solutions was removed from the index in the latest rebalance, even as it earns an attractive Stock Rating.

Broadridge Financial Solutions’ Core Earnings improved from $878 million in fiscal 2025 to $932 million in the TTM ended fiscal 2Q26. However, GAAP earnings improved much more, from $840 million to $1.1 billion, over the same time.

Figure 3 shows how Broadridge Financial Solutions’ GAAP Earnings Distortion increased from -$39 million (Core Earnings > GAAP) in fiscal 2025 to $135 million (Core Earnings < GAAP) in the TTM ended fiscal 2Q26.

Figure 3: Broadridge Financial Solutions’ Core Earnings vs. GAAP Net Income Since Fiscal 2021

How I Reconcile Broadridge’s GAAP Earnings to Core Earnings

Below, I detail the hidden and reported unusual items that distort Broadridge Financial Solutions’ GAAP Earnings in the TTM ended fiscal 2Q26.

Broadridge Financial Solutions’ GAAP Earnings Distortion Score is strong miss. The company’s GAAP Earnings Distortion of $135 million, or $1.14/share is 13% of reported earnings and 1.6% of total assets. In other words, Broadridge Financial Solutions’ GAAP earnings are overstated because they include $1.14/share of net unusual gains.

Figure 4 details the GAAP Earnings Distortion between Broadridge Financial Solutions’ TTM ended fiscal 2Q26 Core Earnings and GAAP Earnings.

Figure 4: Broadridge Financial GAAP Earnings to Core Earnings Reconciliation: TTM Fiscal 2Q26

Using Core Earnings to Pick Stocks Drives Alpha

You don’t have to take my word for it when I say picking stocks based on Core Earnings drives novel alpha.

The outperformance of the Bloomberg New Constructs Core Earnings Leaders Index provides real-time proof.

Per Figure 5, The Bloomberg New Constructs Core Earnings Leaders Index beat the S&P 500 by 9% in 2025. The Index (ticker: BCORET:IND) was up 27% while the S&P 500 was up 18%.

Figure 5: Bloomberg New Constructs Core Earnings Leaders Index Outperforms S&P 500 in 2025

Sources: Bloomberg as of December 31, 2025
Note: Past performance is no guarantee of future results