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A O Smith Corp (NYSE:AOS)
Gross Profit
$827 Mil (TTM As of Sep. 2014)

A O Smith Corp's gross profit for the three months ended in Sep. 2014 was $215 Mil. A O Smith Corp's gross profit for the trailing twelve months (TTM) ended in Sep. 2014 was $827 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 Sep. 2014 was $215 Mil. A O Smith Corp's revenue for the three months ended in Sep. 2014 was $582 Mil. Therefore, A O Smith Corp's Gross Margin for the quarter that ended in Sep. 2014 was 37.02%.

A O Smith Corp had a gross margin of 37.02% for the quarter that ended in Sep. 2014 => Competition eroding margins

During the past 13 years, the highest Gross Margin of A O Smith Corp was 35.93%. The lowest was 17.58%. And the median was 21.42%.


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. 2013 is calculated as

Gross Profit (A: Dec. 2013 )=Revenue - Cost of Goods Sold
=2153.8 - 1380
=774

A O Smith Corp's Gross Profit for the quarter that ended in Sep. 2014 is calculated as

Gross Profit (Q: Sep. 2014 )=Revenue - Cost of Goods Sold
=581.6 - 366.3
=215

A O Smith Corp Gross Profit for the trailing twelve months (TTM) ended in Sep. 2014 was 199.9 (Dec. 2013 ) + 195.9 (Mar. 2014 ) + 216.2 (Jun. 2014 ) + 215.3 (Sep. 2014 ) = $827 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 Sep. 2014 is calculated as

Gross Margin (Q: Sep. 2014 )=Gross Profit (Q: Sep. 2014 ) / Revenue (Q: Sep. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=215 / 581.6
=37.02 %

* 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 37.02% for the quarter that ended in Sep. 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.

A O Smith Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 298352464513498395446513652774

A O Smith Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Gross_Profit 161157186179198197200196216215
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