Statutory Profit Doesn't Reflect How Good Becton Dickinson's (NYSE:BDX) Earnings Are

Even though Becton, Dickinson and Company's (NYSE:BDX) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for Becton Dickinson

How Do Unusual Items Influence Profit?

For anyone who wants to understand Becton Dickinson's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$514m due 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, after all, that's exactly what the accounting terminology implies. If Becton Dickinson 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 Becton Dickinson's Profit Performance

Because unusual items detracted from Becton Dickinson'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 Becton Dickinson's statutory profit actually understates its earnings potential! And the EPS is up 12% annually, over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Becton Dickinson at this point in time. Case in point: We've spotted 2 warning signs for Becton Dickinson you should be mindful of and 1 of them is a bit unpleasant.

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