Solid Earnings Reflect Crown Holdings' (NYSE:CCK) Strength As A Business

Crown Holdings, Inc. (NYSE:CCK) recently posted some strong earnings, and the market responded positively. We did some digging and found some further encouraging factors that investors will like.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Crown Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$352m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Crown Holdings 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 Crown Holdings' Profit Performance

Unusual items (expenses) detracted from Crown Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Crown Holdings' statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over 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. So while earnings quality is important, it's equally important to consider the risks facing Crown Holdings at this point in time. When we did our research, we found 3 warning signs for Crown Holdings (1 is a bit concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Crown Holdings' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.