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GuruFocus has detected 3 Warning Signs with United Parcel Service Inc \$UPS.
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United Parcel Service Inc (NYSE:UPS)
Gross Profit
\$46,675 Mil (TTM As of Sep. 2016)

United Parcel Service Inc's gross profit for the three months ended in Sep. 2016 was \$11,541 Mil. United Parcel Service Inc's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$46,675 Mil.

Gross Margin is calculated as gross profit divided by its revenue. United Parcel Service Inc's gross profit for the three months ended in Sep. 2016 was \$11,541 Mil. United Parcel Service Inc's revenue for the three months ended in Sep. 2016 was \$14,928 Mil. Therefore, United Parcel Service Inc's Gross Margin for the quarter that ended in Sep. 2016 was 77.31%.

United Parcel Service Inc had a gross margin of 77.31% for the quarter that ended in Sep. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of United Parcel Service Inc was 80.53%. The lowest was 74.57%. And the median was 76.68%.

Definition

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

United Parcel Service Inc's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

 Gross Profit (A: Dec. 2015 ) = Revenue - Cost of Goods Sold = 58363 - 12947 = 45,416

United Parcel Service Inc's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = 14928 - 3387 = 11,541

United Parcel Service Inc Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 12398 (Dec. 2015 ) + 11310 (Mar. 2016 ) + 11426 (Jun. 2016 ) + 11541 (Sep. 2016 ) = \$46,675 Mil.

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

United Parcel Service Inc's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

 Gross Margin (Q: Sep. 2016 ) = Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 11,541 / 14928 = 77.31 %

* 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

United Parcel Service Inc had a gross margin of 77.31% for the quarter that ended in Sep. 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.

United Parcel Service Inc Annual Data

 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Gross_Profit 38,241 39,659 39,608 36,478 37,863 39,598 40,553 41,735 43,474 45,416

United Parcel Service Inc Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Gross_Profit 10,718 10,681 11,802 10,835 11,092 11,091 12,398 11,310 11,426 11,541
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