Arcosa's (NYSE:ACA) Soft Earnings Are Actually Better Than They Appear

The most recent earnings report from Arcosa, Inc. (NYSE:ACA) was disappointing for shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Arcosa

How Do Unusual Items Influence Profit?

To properly understand Arcosa's profit results, we need to consider the US$28m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Arcosa 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 Arcosa's Profit Performance

Unusual items (expenses) detracted from Arcosa's earnings over the last year, but we might see an improvement next year. Because of this, we think Arcosa's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 34% annually, 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 Arcosa, you'd also look into what risks it is currently facing. For example - Arcosa has 2 warning signs we think you should be aware of.

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