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A.O. Smith Corp (NYSE:AOS)
Gross Profit
$1,045 Mil (TTM As of Mar. 2016)

A.O. Smith Corp's gross profit for the three months ended in Mar. 2016 was $263 Mil. A.O. Smith Corp's gross profit for the trailing twelve months (TTM) ended in Mar. 2016 was $1,045 Mil.

Gross Margin is calculated as gross profit divided by its revenue. A.O. Smith Corp's gross profit for the three months ended in Mar. 2016 was $263 Mil. A.O. Smith Corp's revenue for the three months ended in Mar. 2016 was $637 Mil. Therefore, A.O. Smith Corp's Gross Margin for the quarter that ended in Mar. 2016 was 41.25%.

A.O. Smith Corp had a gross margin of 41.25% for the quarter that ended in Mar. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of A.O. Smith Corp was 39.81%. The lowest was 21.46%. And the median was 29.96%.


Definition

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

A.O. Smith Corp'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
=2536.5 - 1526.7
=1,010

A.O. Smith Corp's Gross Profit for the quarter that ended in Mar. 2016 is calculated as

Gross Profit (Q: Mar. 2016 )=Revenue - Cost of Goods Sold
=636.9 - 374.2
=263

A.O. Smith Corp Gross Profit for the trailing twelve months (TTM) ended in Mar. 2016 was 263.3 (Jun. 2015 ) + 256.7 (Sep. 2015 ) + 262.6 (Dec. 2015 ) + 262.7 (Mar. 2016 ) = $1,045 Mil.

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

A.O. Smith Corp's Gross Margin for the quarter that ended in Mar. 2016 is calculated as

Gross Margin (Q: Mar. 2016 )=Gross Profit (Q: Mar. 2016 ) / Revenue (Q: Mar. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=263 / 636.9
=41.25 %

* 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

A.O. Smith Corp had a gross margin of 41.25% for the quarter that ended in Mar. 2016 => Durable 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.

A.O. Smith Corp Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 4645134985014465136527748591,010

A.O. Smith Corp Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
Gross_Profit 200196216215232229263257263263
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