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Arthur J Gallagher & Co (NYSE:AJG)
Gross Profit
$1,518 Mil (TTM As of Mar. 2014)

Arthur J Gallagher & Co's gross profit for the three months ended in Mar. 2014 was $278 Mil. Arthur J Gallagher & Co's gross profit for the trailing twelve months (TTM) ended in Mar. 2014 was $1,518 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 Mar. 2014 was $278 Mil. Arthur J Gallagher & Co's revenue for the three months ended in Mar. 2014 was $915 Mil. Therefore, Arthur J Gallagher & Co's Gross Margin for the quarter that ended in Mar. 2014 was 30.35%.

Arthur J Gallagher & Co had a gross margin of 30.35% for the quarter that ended in Mar. 2014 => Competition eroding margins

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 69.01%.

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 Mar. 2014 is calculated as

Gross Profit (Q: Mar. 2014 )=Revenue - Cost of Goods Sold
=915 - 637.3
=278

Arthur J Gallagher & Co Gross Profit for the trailing twelve months (TTM) ended in Mar. 2014 was 702.9 (Jun. 2013 ) + 276.4 (Sep. 2013 ) + 261.4 (Dec. 2013 ) + 277.7 (Mar. 2014 ) = $1,518 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 Mar. 2014 is calculated as

Gross Margin (Q: Mar. 2014 )=Gross Profit (Q: Mar. 2014 ) / Revenue (Q: Mar. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=278 / 915
=30.35 %

* 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 30.35% for the quarter that ended in Mar. 2014 => Competition eroding margins


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

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
Gross_Profit 198185621249225232703276261278
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