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GuruFocus has detected 5 Warning Signs with Johnson & Johnson $JNJ.
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Johnson & Johnson (NYSE:JNJ)
Gross Profit
$50,205 Mil (TTM As of Dec. 2016)

Johnson & Johnson's gross profit for the three months ended in Dec. 2016 was $12,572 Mil. Johnson & Johnson's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $50,205 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Johnson & Johnson's gross profit for the three months ended in Dec. 2016 was $12,572 Mil. Johnson & Johnson's revenue for the three months ended in Dec. 2016 was $18,106 Mil. Therefore, Johnson & Johnson's Gross Margin for the quarter that ended in Dec. 2016 was 69.44%.

Johnson & Johnson had a gross margin of 69.44% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Johnson & Johnson was 70.96%. The lowest was 67.78%. And the median was 69.45%.


Definition

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

Johnson & Johnson'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
=71890 - 21685
=50,205

Johnson & Johnson's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

Gross Profit (Q: Dec. 2016 )=Revenue - Cost of Goods Sold
=18106 - 5534
=12,572

Johnson & Johnson Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 12153 (Mar. 2016 ) + 13146 (Jun. 2016 ) + 12334 (Sep. 2016 ) + 12572 (Dec. 2016 ) = $50,205 Mil.

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

Johnson & Johnson'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
=12,572 / 18106
=69.44 %

* 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

Johnson & Johnson had a gross margin of 69.44% for the quarter that ended in Dec. 2016 => Durable 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.

Johnson & Johnson Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 43,34445,23643,45042,79544,67045,56648,97051,58548,53850,205

Johnson & Johnson Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 12,40112,09212,43011,87812,13812,15313,14612,33412,57212,380
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