Investors Can Find Comfort In Rockwell Automation's (NYSE:ROK) Earnings Quality

Soft earnings didn't appear to concern Rockwell Automation, Inc.'s (NYSE:ROK) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Rockwell Automation

The Impact Of Unusual Items On Profit

To properly understand Rockwell Automation's profit results, we need to consider the US$160m expense attributed 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, after all, that's exactly what the accounting terminology implies. If Rockwell Automation 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 Rockwell Automation's Profit Performance

Because unusual items detracted from Rockwell Automation'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 Rockwell Automation's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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 Rockwell Automation, you'd also look into what risks it is currently facing. For example - Rockwell Automation has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Rockwell Automation'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. 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.