Why Otis Worldwide's (NYSE:OTIS) Earnings Are Better Than They Seem

The stock was sluggish on the back of Otis Worldwide Corporation's (NYSE:OTIS) recent earnings report. Our analysis suggests that there are some reasons for hope that investors should be aware of.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Otis Worldwide's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$281m 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 Otis Worldwide 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 Otis Worldwide's Profit Performance

Because unusual items detracted from Otis Worldwide's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Otis Worldwide's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 31% per year over the last three years. 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'd like to know more about Otis Worldwide as a business, it's important to be aware of any risks it's facing. For example, Otis Worldwide has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Otis Worldwide's profit. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.