Some May Be Optimistic About Keurig Dr Pepper's (NASDAQ:KDP) Earnings

Soft earnings didn't appear to concern Keurig Dr Pepper Inc.'s (NASDAQ:KDP) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

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How Do Unusual Items Influence Profit?

To properly understand Keurig Dr Pepper's profit results, we need to consider the US$811m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Keurig Dr Pepper 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 Keurig Dr Pepper's Profit Performance

Because unusual items detracted from Keurig Dr Pepper's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Keurig Dr Pepper's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 3 warning signs for Keurig Dr Pepper (of which 1 is a bit unpleasant!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Keurig Dr Pepper'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.