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GuruFocus has detected 6 Warning Signs with Emerson Electric Co \$EMR.
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Emerson Electric Co (NYSE:EMR)
Gross Profit
\$6,262 Mil (TTM As of Sep. 2016)

Emerson Electric Co's gross profit for the three months ended in Sep. 2016 was \$285 Mil. Emerson Electric Co's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$6,262 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Emerson Electric Co's gross profit for the three months ended in Sep. 2016 was \$285 Mil. Emerson Electric Co's revenue for the three months ended in Sep. 2016 was \$-245 Mil. Therefore, Emerson Electric Co's Gross Margin for the quarter that ended in Sep. 2016 was -116.33%.

Emerson Electric Co had a gross margin of -116.33% for the quarter that ended in Sep. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Emerson Electric Co was 43.77%. The lowest was 36.44%. And the median was 39.79%.

Definition

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

Emerson Electric Co's Gross Profit for the fiscal year that ended in Sep. 2016 is calculated as

 Gross Profit (A: Sep. 2016 ) = Revenue - Cost of Goods Sold = 14522 - 8260 = 6,262

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

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = -245 - -530 = 285

Emerson Electric Co Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 1889 (Dec. 2015 ) + 1994 (Mar. 2016 ) + 2094 (Jun. 2016 ) + 285 (Sep. 2016 ) = \$6,262 Mil.

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

Emerson Electric Co'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 = 285 / -245 = -116.33 %

* 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

Emerson Electric Co had a gross margin of -116.33% for the quarter that ended in Sep. 2016 => No sustainable competitive advantage

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.

Emerson Electric Co Annual Data

 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 Sep14 Sep15 Sep16 Gross_Profit 8,065 9,139 7,560 8,326 9,557 9,768 9,952 7,762 7,008 6,262

Emerson Electric Co Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Gross_Profit 2,638 493 2,280 2,166 2,234 328 1,889 1,994 2,094 285
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