JBT Marel's (NYSE:JBTM) Shareholders Have More To Worry About Than Only Soft Earnings

The market shrugged off JBT Marel Corporation's (NYSE:JBTM) weak earnings report last week. We looked at the details, and we think that investors may be responding to some encouraging factors.

See our latest analysis for JBT Marel

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, JBT Marel increased the number of shares on issue by 63% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out JBT Marel's historical EPS growth by clicking on this link.

How Is Dilution Impacting JBT Marel's Earnings Per Share (EPS)?

Unfortunately, JBT Marel's profit is down 8.5% per year over three years. Even looking at the last year, profit was still down 35%. Sadly, earnings per share fell further, down a full 35% in that time. So you can see that the dilution has had a fairly significant impact on shareholders.

If JBT Marel's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

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?

On top of the dilution, we should also consider the US$87m impact of unusual items in the last year, which had the effect of suppressing profit. 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. In the twelve months to December 2024, JBT Marel had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Our Take On JBT Marel's Profit Performance

JBT Marel 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, we think it's very unlikely that JBT Marel's statutory profits make it seem much weaker than it is. So while earnings quality is important, it's equally important to consider the risks facing JBT Marel at this point in time. For example, we've found that JBT Marel has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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. 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.