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Plains Exploration & Production Company (NYSE:PXP)
Gross Profit
\$2,528 Mil (TTM As of Mar. 2013)

Plains Exploration & Production Company's gross profit for the three months ended in Mar. 2013 was \$985 Mil. Plains Exploration & Production Company's gross profit for the trailing twelve months (TTM) ended in Mar. 2013 was \$2,528 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Plains Exploration & Production Company's gross profit for the three months ended in Mar. 2013 was \$985 Mil. Plains Exploration & Production Company's revenue for the three months ended in Mar. 2013 was \$1,232 Mil. Therefore, Plains Exploration & Production Company's Gross Margin for the quarter that ended in Mar. 2013 was 79.94%.

Plains Exploration & Production Company had a gross margin of 79.94% for the quarter that ended in Mar. 2013 => Durable competitive advantage

Definition

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

Plains Exploration & Production Company's Gross Profit for the fiscal year that ended in Dec. 2012 is calculated as

 Gross Profit (A: Dec. 2012 ) = Revenue - Cost of Goods Sold = 2565.307 - 632.452 = 1,933

Plains Exploration & Production Company's Gross Profit for the quarter that ended in Mar. 2013 is calculated as

 Gross Profit (Q: Mar. 2013 ) = Revenue - Cost of Goods Sold = 1232.115 - 247.143 = 985

Plains Exploration & Production Company Gross Profit for the trailing twelve months (TTM) ended in Mar. 2013 was 420.46 (Jun. 2012 ) + 444.707 (Sep. 2012 ) + 677.82 (Dec. 2012 ) + 984.972 (Mar. 2013 ) = \$2,528 Mil.

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

Plains Exploration & Production Company's Gross Margin for the quarter that ended in Mar. 2013 is calculated as

 Gross Margin (Q: Mar. 2013 ) = Gross Profit (Q: Mar. 2013 ) / Revenue (Q: Mar. 2013 ) = (Revenue - Cost of Goods Sold) / Revenue = 985 / 1232.115 = 79.94 %

* 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

Plains Exploration & Production Company had a gross margin of 79.94% for the quarter that ended in Mar. 2013 => Durable competitive advantage

Related Terms

Historical Data

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

Plains Exploration & Production Company Annual Data

 Dec03 Dec04 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Gross_Profit 199 449 659 730 892 1,777 763 1,093 1,468 1,933

Plains Exploration & Production Company Quarterly Data

 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 Gross_Profit 286 308 372 384 374 390 420 445 678 985
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