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GuruFocus has detected 2 Warning Signs with Freeport-McMoRan Inc $FCX.
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Freeport-McMoRan Inc (NYSE:FCX)
Gross Profit
$-2,751 Mil (TTM As of Dec. 2016)

Freeport-McMoRan Inc's gross profit for the three months ended in Dec. 2016 was $1,035 Mil. Freeport-McMoRan Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $-2,751 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Freeport-McMoRan Inc's gross profit for the three months ended in Dec. 2016 was $1,035 Mil. Freeport-McMoRan Inc's revenue for the three months ended in Dec. 2016 was $4,377 Mil. Therefore, Freeport-McMoRan Inc's Gross Margin for the quarter that ended in Dec. 2016 was 23.65%.

Freeport-McMoRan Inc had a gross margin of 23.65% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Freeport-McMoRan Inc was 50.63%. The lowest was -87.68%. And the median was 32.93%.


Definition

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

Freeport-McMoRan Inc's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

Gross Profit (A: Dec. 2016 )=Revenue - Cost of Goods Sold
=14830 - 17580
=-2,750

Freeport-McMoRan Inc's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

Gross Profit (Q: Dec. 2016 )=Revenue - Cost of Goods Sold
=4377 - 3342
=1,035

Freeport-McMoRan Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was -3707 (Mar. 2016 ) + -545 (Jun. 2016 ) + 466 (Sep. 2016 ) + 1035 (Dec. 2016 ) = $-2,751 Mil.

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

Freeport-McMoRan Inc'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
=1,035 / 4377
=23.65 %

* 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

Freeport-McMoRan Inc had a gross margin of 23.65% 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.

Freeport-McMoRan Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 7,1664,8166,9019,6119,9606,4496,2841,507-12,808-2,750

Freeport-McMoRan Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 1,291-2,493-2,802-2,232-3,779-3,919-3,707-5454661,035
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