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GuruFocus has detected 5 Warning Signs with Esterline Technologies Corp $ESL.
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Esterline Technologies Corp (NYSE:ESL)
Gross Profit
$668 Mil (TTM As of Dec. 2016)

Esterline Technologies Corp's gross profit for the three months ended in Dec. 2016 was $144 Mil. Esterline Technologies Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $668 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Esterline Technologies Corp's gross profit for the three months ended in Dec. 2016 was $144 Mil. Esterline Technologies Corp's revenue for the three months ended in Dec. 2016 was $458 Mil. Therefore, Esterline Technologies Corp's Gross Margin for the quarter that ended in Dec. 2016 was 31.47%.

Esterline Technologies Corp had a gross margin of 31.47% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Esterline Technologies Corp was 37.31%. The lowest was 30.91%. And the median was 33.52%.

Warning Sign:

Esterline Technologies Corp gross margin has been in long term decline. The average rate of decline per year is -1.4%.


Definition

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

Esterline Technologies Corp'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
=1992.631 - 1331.386
=661

Esterline Technologies Corp's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

Gross Profit (Q: Dec. 2016 )=Revenue - Cost of Goods Sold
=457.733 - 313.686
=144

Esterline Technologies Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 156.173 (Mar. 2016 ) + 173.584 (Jun. 2016 ) + 193.769 (Sep. 2016 ) + 144.047 (Dec. 2016 ) = $668 Mil.

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

Esterline Technologies Corp's Gross Margin for the quarter that ended in Dec. 2016 is calculated as

Gross Margin (Q: Dec. 2016 )=Gross Profit (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=144 / 457.733
=31.47 %

* 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

Esterline Technologies Corp had a gross margin of 31.47% for the quarter that ended in Dec. 2016 => 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 local exchange's currency.

Esterline Technologies Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Sep15Sep16
Gross_Profit 373490453516590678705721589661

Esterline Technologies Corp Quarterly Data

Oct14Jan15Apr15Jul15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 194145164170111138156174194144
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