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Baker Hughes Inc (NYSE:BHI)
Gross Profit
$-205 Mil (TTM As of Sep. 2016)

Baker Hughes Inc's gross profit for the three months ended in Sep. 2016 was $294 Mil. Baker Hughes Inc's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was $-205 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Baker Hughes Inc's gross profit for the three months ended in Sep. 2016 was $294 Mil. Baker Hughes Inc's revenue for the three months ended in Sep. 2016 was $2,353 Mil. Therefore, Baker Hughes Inc's Gross Margin for the quarter that ended in Sep. 2016 was 12.49%.

Baker Hughes Inc had a gross margin of 12.49% for the quarter that ended in Sep. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Baker Hughes Inc was 39.70%. The lowest was 7.88%. And the median was 22.72%.

Warning Sign:

Baker Hughes Inc gross margin has been in long term decline. The average rate of decline per year is -15.3%.


Definition

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

Baker Hughes Inc's Gross Profit for the fiscal year that ended in Dec. 2014 is calculated as

Gross Profit (A: Dec. 2014 )=Revenue - Cost of Goods Sold
=24551 - 19746
=4,805

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

Gross Profit (Q: Sep. 2016 )=Revenue - Cost of Goods Sold
=2353 - 2059
=294

Baker Hughes Inc Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 193 (Dec. 2015 ) + 12 (Mar. 2016 ) + -704 (Jun. 2016 ) + 294 (Sep. 2016 ) = $-205 Mil.

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

Baker Hughes Inc'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
=294 / 2353
=12.49 %

* 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

Baker Hughes Inc had a gross margin of 12.49% for the quarter that ended in Sep. 2016 => 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 local exchange's currency.

Baker Hughes Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 3,5843,5833,9102,2673,2304,5674,0053,8114,8051,240

Baker Hughes Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
Gross_Profit 1,1901,1431,46125238441119312-704294
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