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GuruFocus has detected 4 Warning Signs with McCormick & Co Inc \$MKC.
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McCormick & Co Inc (NYSE:MKC)
Gross Profit
\$1,832 Mil (TTM As of Nov. 2016)

McCormick & Co Inc's gross profit for the three months ended in Nov. 2016 was \$540 Mil. McCormick & Co Inc's gross profit for the trailing twelve months (TTM) ended in Nov. 2016 was \$1,832 Mil.

Gross Margin is calculated as gross profit divided by its revenue. McCormick & Co Inc's gross profit for the three months ended in Nov. 2016 was \$540 Mil. McCormick & Co Inc's revenue for the three months ended in Nov. 2016 was \$1,227 Mil. Therefore, McCormick & Co Inc's Gross Margin for the quarter that ended in Nov. 2016 was 44.01%.

McCormick & Co Inc had a gross margin of 44.01% for the quarter that ended in Nov. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of McCormick & Co Inc was 42.49%. The lowest was 40.30%. And the median was 40.83%.

Definition

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

McCormick & Co Inc's Gross Profit for the fiscal year that ended in Nov. 2016 is calculated as

 Gross Profit (A: Nov. 2016 ) = Revenue - Cost of Goods Sold = 4411.5 - 2579.8 = 1,832

McCormick & Co Inc's Gross Profit for the quarter that ended in Nov. 2016 is calculated as

 Gross Profit (Q: Nov. 2016 ) = Revenue - Cost of Goods Sold = 1227 - 687 = 540

McCormick & Co Inc Gross Profit for the trailing twelve months (TTM) ended in Nov. 2016 was 405 (Feb. 2016 ) + 432.8 (May. 2016 ) + 453.9 (Aug. 2016 ) + 540 (Nov. 2016 ) = \$1,832 Mil.

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

McCormick & Co Inc's Gross Margin for the quarter that ended in Nov. 2016 is calculated as

 Gross Margin (Q: Nov. 2016 ) = Gross Profit (Q: Nov. 2016 ) / Revenue (Q: Nov. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 540 / 1227 = 44.01 %

* 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

McCormick & Co Inc had a gross margin of 44.01% for the quarter that ended in Nov. 2016 => Durable 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.

McCormick & Co Inc Annual Data

 Nov07 Nov08 Nov09 Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 Nov16 Gross_Profit 1,192 1,288 1,327 1,418 1,523 1,618 1,666 1,730 1,737 1,832

McCormick & Co Inc Quarterly Data

 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Gross_Profit 420 506 390 404 422 522 405 433 454 540
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