Even though Pilgrim's Pride Corporation's (NASDAQ:PPC) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.
How Do Unusual Items Influence Profit?
To properly understand Pilgrim's Pride's profit results, we need to consider the US$90m expense attributed 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Pilgrim's Pride 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 Pilgrim's Pride's Profit Performance
Unusual items (expenses) detracted from Pilgrim's Pride's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Pilgrim's Pride's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. If you'd like to know more about Pilgrim's Pride as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Pilgrim's Pride you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Pilgrim's Pride's profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying 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.