Capital Goods - Chart of the Week #49_ Who is adjusting operating profit the most_

Summary of Barclays Capital Goods Research Report Industry Overview - The report focuses on the European Capital Goods sector, providing insights into the performance metrics of companies within this industry [22][24]. Core Insights and Arguments - Adjusted Operating Profit vs Reported EBIT: - On average, reported EBIT is approximately 14% below company-defined adjusted operating profit [24]. - Over the last five years, adjusted operating profit has been about 14% higher than P&L EBIT [24]. - The report highlights that adjusted metrics are not covered by financial reporting standards and are subject to management discretion, necessitating greater scrutiny [24]. - Performance Metrics: - The average P&L EBIT is around 15% below adjusted operating profit, with a range from 0% to 60% [24]. - A median analysis shows that P&L EBIT is on average greater than 10% below adjusted operating profit per year, except in 2021 where it was less than 10% [24]. - Only seven stocks have had zero adjustments over the last five years, while four stocks are more than 30% below adjusted operating profit, and another eight stocks are more than 20% below on a five-year median [24]. - Restructuring Considerations: - Some companies have undergone restructuring over the past five years, leading to elevated adjustments. Continuous restructuring adjustments should be monitored closely [24]. Additional Important Information - The report emphasizes the importance of understanding the differences between reported EBIT and adjusted operating profit, as analysts often value companies based on adjusted earnings streams [24]. - The report is intended for institutional investors and not for retail investors, highlighting the potential conflicts of interest and the need for independent evaluation of investment opportunities [2][7]. Analyst Information - The report is authored by a team of analysts including Jonathan Hurn, Timothy Lee, Vlad Sergievskii, James Winchester, Xin Wang, and George Featherstone, all of whom are certified and have provided their contact information for further inquiries [4][11][24]. This summary encapsulates the key points from the Barclays Capital Goods research report, focusing on the performance metrics and considerations within the European Capital Goods sector.