Investors signalled that they were pleased with Coca-Cola Consolidated, Inc.'s (NASDAQ:COKE) most recent earnings report. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.
The Impact Of Unusual Items On Profit
To properly understand Coca-Cola Consolidated's profit results, we need to consider the US$226m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Coca-Cola Consolidated doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Coca-Cola Consolidated.
Our Take On Coca-Cola Consolidated's Profit Performance
Unusual items (expenses) detracted from Coca-Cola Consolidated's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Coca-Cola Consolidated's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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 Coca-Cola Consolidated as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Coca-Cola Consolidated you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Coca-Cola Consolidated'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 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.