Medtronic (NYSE:MDT) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Medtronic plc's (NYSE:MDT) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Medtronic

How Do Unusual Items Influence Profit?

To properly understand Medtronic's profit results, we need to consider the US$996m 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, after all, that's exactly what the accounting terminology implies. If Medtronic 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 Medtronic's Profit Performance

Because unusual items detracted from Medtronic'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 Medtronic's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 6.7% in the 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'd like to know more about Medtronic as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Medtronic and we think they deserve your attention.

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