Helmerich & Payne's (NYSE:HP) Promising Earnings May Rest On Soft Foundations

Despite announcing strong earnings, Helmerich & Payne, Inc.'s (NYSE:HP) stock was sluggish. We did some digging and found some worrying underlying problems.

View our latest analysis for Helmerich & Payne

The Impact Of Unusual Items On Profit

To properly understand Helmerich & Payne's profit results, we need to consider the US$25m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. If Helmerich & Payne doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Helmerich & Payne's Profit Performance

Arguably, Helmerich & Payne's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Helmerich & Payne's true underlying earnings power is actually less than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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 want to do dive deeper into Helmerich & Payne, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Helmerich & Payne and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Helmerich & Payne's profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.