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Arthur J. Gallagher & Co. (NYSE:AJG)
Gross Profit
$673 Mil (TTM As of Dec. 2013)

Arthur J. Gallagher & Co.'s gross profit for the three months ended in Dec. 2013 was $-951 Mil. Arthur J. Gallagher & Co.'s gross profit for the trailing twelve months (TTM) ended in Dec. 2013 was $673 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Arthur J. Gallagher & Co.'s gross profit for the three months ended in Dec. 2013 was $-951 Mil. Arthur J. Gallagher & Co.'s revenue for the three months ended in Dec. 2013 was $890 Mil. Therefore, Arthur J. Gallagher & Co.'s Gross Margin for the quarter that ended in Dec. 2013 was -106.77%.

Arthur J. Gallagher & Co. had a gross margin of -106.77% for the quarter that ended in Dec. 2013 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Arthur J. Gallagher & Co. was 81.36%. The lowest was 33.25%. And the median was 69.03%.

Warning Sign:

Arthur J. Gallagher & Co. gross margin has been in long term decline. The average rate of decline per year is -11.7%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Arthur J. Gallagher & Co.'s Gross Profit for the fiscal year that ended in Dec. 2013 is calculated as

Gross Profit (A: Dec. 2013 )=Revenue - Cost of Goods Sold
=3179.6 - 2122.3
=1,057

Arthur J. Gallagher & Co.'s Gross Profit for the quarter that ended in Dec. 2013 is calculated as

Gross Profit (Q: Dec. 2013 )=Revenue - Cost of Goods Sold
=890.2 - 1840.7
=-951

Arthur J. Gallagher & Co. Gross Profit for the trailing twelve months (TTM) ended in Dec. 2013 was 232.1 (Mar. 2013 ) + 702.9 (Jun. 2013 ) + 688.9 (Sep. 2013 ) + -950.5 (Dec. 2013 ) = $673 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Arthur J. Gallagher & Co.'s Gross Margin for the quarter that ended in Dec. 2013 is calculated as

Gross Margin (Q: Dec. 2013 )=Gross Profit (Q: Dec. 2013 ) / Revenue (Q: Dec. 2013 )
=(Revenue - Cost of Goods Sold) / Revenue
=-951 / 890.2
=-106.77 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Arthur J. Gallagher & Co. had a gross margin of -106.77% for the quarter that ended in Dec. 2013 => No sustainable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arthur J. Gallagher & Co. Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 1,1699561,0541,1861,2646616837779151,057

Arthur J. Gallagher & Co. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Gross_Profit 217198185621623-857232703689-951
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