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Emerson Electric Co.'s (NYSE:EMR) stock was strong despite it releasing a soft earnings report last week. We think that investors might be looking at some positive factors beyond the earnings numbers.
We've discovered 2 warning signs about Emerson Electric. View them for free.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Emerson Electric's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$603m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Emerson Electric to produce a higher profit next year, all else being equal.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On Emerson Electric's Profit Performance
Unusual items (expenses) detracted from Emerson Electric's earnings over the last year, but we might see an improvement next year. Because of this, we think Emerson Electric's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Emerson Electric, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Emerson Electric you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Emerson Electric's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
