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GuruFocus has detected 7 Warning Signs with ConocoPhillips \$COP.
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ConocoPhillips (NYSE:COP)
Gross Profit
\$4,037 Mil (TTM As of Sep. 2016)

ConocoPhillips's gross profit for the three months ended in Sep. 2016 was \$2,171 Mil. ConocoPhillips's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$4,037 Mil.

Gross Margin is calculated as gross profit divided by its revenue. ConocoPhillips's gross profit for the three months ended in Sep. 2016 was \$2,171 Mil. ConocoPhillips's revenue for the three months ended in Sep. 2016 was \$6,516 Mil. Therefore, ConocoPhillips's Gross Margin for the quarter that ended in Sep. 2016 was 33.32%.

ConocoPhillips had a gross margin of 33.32% for the quarter that ended in Sep. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of ConocoPhillips was 48.35%. The lowest was 16.91%. And the median was 31.23%.

Warning Sign:

ConocoPhillips gross margin has been in long term decline. The average rate of decline per year is -2%.

Definition

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

ConocoPhillips's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

 Gross Profit (A: Dec. 2015 ) = Revenue - Cost of Goods Sold = 30935 - 23634 = 7,301

ConocoPhillips's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = 6516 - 4345 = 2,171

ConocoPhillips Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was -1698 (Dec. 2015 ) + 1436 (Mar. 2016 ) + 2128 (Jun. 2016 ) + 2171 (Sep. 2016 ) = \$4,037 Mil.

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

ConocoPhillips's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

 Gross Margin (Q: Sep. 2016 ) = Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 2,171 / 6516 = 33.32 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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

ConocoPhillips had a gross margin of 33.32% for the quarter that ended in Sep. 2016 => Competition eroding margins

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

ConocoPhillips Annual Data

 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Gross_Profit 59,211 60,383 65,701 38,436 51,114 28,808 29,979 27,135 22,464 7,301

ConocoPhillips Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Gross_Profit 7,176 6,173 2,089 2,963 3,632 2,404 -1,698 1,436 2,128 2,171
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