The market for Rockwell Automation, Inc.'s (NYSE:ROK) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Rockwell Automation's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$160m 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. If Rockwell Automation doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
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 Rockwell Automation's Profit Performance
Because unusual items detracted from Rockwell Automation's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Rockwell Automation's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Rockwell Automation at this point in time. You'd be interested to know, that we found 2 warning signs for Rockwell Automation and you'll want to know about these.
Today we've zoomed in on a single data point to better understand the nature of Rockwell Automation'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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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.
