Reckitt Benckiser Group's (LON:RKT) Soft Earnings Are Actually Better Than They Appear

Reckitt Benckiser Group plc's (LON:RKT) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

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The Impact Of Unusual Items On Profit

To properly understand Reckitt Benckiser Group's profit results, we need to consider the UK£1.0b expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Reckitt Benckiser Group 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 Reckitt Benckiser Group's Profit Performance

Unusual items (expenses) detracted from Reckitt Benckiser Group's earnings over the last year, but we might see an improvement next year. Because of this, we think Reckitt Benckiser Group's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 want to do dive deeper into Reckitt Benckiser Group, you'd also look into what risks it is currently facing. For example - Reckitt Benckiser Group has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Reckitt Benckiser Group'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 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.