PHINIA's (NYSE:PHIN) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with PHINIA Inc.'s (NYSE:PHIN) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for PHINIA

The Impact Of Unusual Items On Profit

For anyone who wants to understand PHINIA's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$37m due 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect PHINIA 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 PHINIA's Profit Performance

Unusual items (expenses) detracted from PHINIA's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that PHINIA's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into PHINIA, you'd also look into what risks it is currently facing. While conducting our analysis, we found that PHINIA has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of PHINIA'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.