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Level 3 Communications Inc (NYSE:LVLT)
Gross Profit
$3,596 Mil (TTM As of Dec. 2014)

Level 3 Communications Inc's gross profit for the three months ended in Dec. 2014 was $874 Mil. Level 3 Communications Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2014 was $3,596 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Level 3 Communications Inc's gross profit for the three months ended in Dec. 2014 was $874 Mil. Level 3 Communications Inc's revenue for the three months ended in Dec. 2014 was $1,914 Mil. Therefore, Level 3 Communications Inc's Gross Margin for the quarter that ended in Dec. 2014 was 45.66%.

Level 3 Communications Inc had a gross margin of 45.66% for the quarter that ended in Dec. 2014 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Level 3 Communications Inc was 71.68%. The lowest was 14.75%. And the median was 49.45%.

Warning Sign:

Level 3 Communications Inc gross margin has been in long term decline. The average rate of decline per year is -6.9%.


Definition

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

Level 3 Communications 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
=6777 - 3775
=3,002

Level 3 Communications Inc's Gross Profit for the quarter that ended in Dec. 2014 is calculated as

Gross Profit (Q: Dec. 2014 )=Revenue - Cost of Goods Sold
=1914 - 1040
=874

Level 3 Communications Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2014 was 995 (Mar. 2014 ) + 1012 (Jun. 2014 ) + 715 (Sep. 2014 ) + 874 (Dec. 2014 ) = $3,596 Mil.

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

Level 3 Communications Inc's Gross Margin for the quarter that ended in Dec. 2014 is calculated as

Gross Margin (Q: Dec. 2014 )=Gross Profit (Q: Dec. 2014 ) / Revenue (Q: Dec. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=874 / 1914
=45.66 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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

Level 3 Communications Inc had a gross margin of 45.66% for the quarter that ended in Dec. 2014 => 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 own currency.

Level 3 Communications Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Gross_Profit 1,2031,8612,4362,4922,1972,1572,6273,7742,6283,002

Level 3 Communications Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
Gross_Profit 9489599489496476869951,012715874
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