There May Be Reason For Hope In Leonardo's (BIT:LDO) Disappointing Earnings

Soft earnings didn't appear to concern Leonardo S.p.a.'s (BIT:LDO) 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 Leonardo

The Impact Of Unusual Items On Profit

For anyone who wants to understand Leonardo's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €253m due 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 that's hardly a surprise given these line items are considered unusual. If Leonardo 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 Leonardo's Profit Performance

Because unusual items detracted from Leonardo's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Leonardo's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you want to do dive deeper into Leonardo, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Leonardo has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Leonardo's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.