Yahoo Finance Why PPL's (NYSE:PPL) Earnings Are Better Than They Seem
The market seemed underwhelmed by last week's earnings announcement from PPL Corporation (NYSE:PPL) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.
View our latest analysis for PPL
How Do Unusual Items Influence Profit?
Importantly, our data indicates that PPL's profit was reduced by US$261m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 PPL 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 PPL's Profit Performance
Unusual items (expenses) detracted from PPL's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that PPL's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 17% in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that PPL is showing 3 warning signs in our investment analysis and 1 of those is significant...
This note has only looked at a single factor that sheds light on the nature of PPL'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.
