There May Be Some Bright Spots In Wienerberger's (VIE:WIE) Earnings

Soft earnings didn't appear to concern Wienerberger AG's (VIE:WIE) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Wienerberger

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Wienerberger expanded the number of shares on issue by 5.7% over the last year. Therefore, each share now receives a smaller portion of profit. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Wienerberger's EPS by clicking here.

A Look At The Impact Of Wienerberger's Dilution On Its Earnings Per Share (EPS)

Unfortunately, Wienerberger's profit is down 52% per year over three years. Even looking at the last year, profit was still down 77%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 77% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Wienerberger's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Wienerberger's profit suffered from unusual items, which reduced profit by €56m in the last twelve months. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Wienerberger to produce a higher profit next year, all else being equal.

Our Take On Wienerberger's Profit Performance

Wienerberger suffered from unusual items which depressed its profit in its last report; if that is not repeated then profit should be higher, all else being equal. But unfortunately the dilution means that shareholders now own a smaller proportion of the company (assuming they maintained the same number of shares). That will weigh on earnings per share, even if it is not reflected in net income. Based on these factors, it's hard to tell if Wienerberger's profits are a reasonable reflection of its underlying profitability. So while earnings quality is important, it's equally important to consider the risks facing Wienerberger at this point in time. For instance, we've identified 4 warning signs for Wienerberger (1 is concerning) you should be familiar with.

Our examination of Wienerberger has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.