This paper investigates whether Chinese equity investors price major earnings components correctly. Total earnings are decomposed into core and non-core earnings according to a classification framework of Chinese accounting principles. The results show that, as expected, core earnings are more persistent than non-core earnings. Most importantly, the market underestimates (overestimates) the value implications of changes in current core (non-core) earnings for future earnings changes. Therefore, future stock returns can be predicted based on the information that is contained in the components of current earnings. Both portfolio tests and regression analysis generate economically significant abnormal returns that are robust to sensitivity checks.