United Parcel Service's (NYSE:UPS) Soft Earnings Don't Show The Whole Picture

Shareholders appeared unconcerned with United Parcel Service, Inc.'s (NYSE:UPS) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for United Parcel Service

How Do Unusual Items Influence Profit?

To properly understand United Parcel Service's profit results, we need to consider the US$1.2b 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If United Parcel Service 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 United Parcel Service's Profit Performance

Unusual items (expenses) detracted from United Parcel Service's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that United Parcel Service's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 16% per year 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 3 warning signs for United Parcel Service (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 United Parcel Service'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 that insiders are buying.

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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.