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GuruFocus has detected 4 Warning Signs with Weatherford International PLC \$WFT.
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Weatherford International PLC (NYSE:WFT)
Gross Profit
\$560 Mil (TTM As of Dec. 2016)

Weatherford International PLC's gross profit for the three months ended in Dec. 2016 was \$159 Mil. Weatherford International PLC's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$560 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Weatherford International PLC's gross profit for the three months ended in Dec. 2016 was \$159 Mil. Weatherford International PLC's revenue for the three months ended in Dec. 2016 was \$1,406 Mil. Therefore, Weatherford International PLC's Gross Margin for the quarter that ended in Dec. 2016 was 11.31%.

Weatherford International PLC had a gross margin of 11.31% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Weatherford International PLC was 35.42%. The lowest was 9.74%. And the median was 24.32%.

Warning Sign:

Weatherford International PLC gross margin has been in long term decline. The average rate of decline per year is -15.3%.

Definition

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

Weatherford International PLC'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 = 5749 - 5189 = 560

Weatherford International PLC's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 1406 - 1247 = 159

Weatherford International PLC Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 111 (Mar. 2016 ) + 164 (Jun. 2016 ) + 126 (Sep. 2016 ) + 159 (Dec. 2016 ) = \$560 Mil.

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

Weatherford International PLC'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 = 159 / 1406 = 11.31 %

* 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

Weatherford International PLC had a gross margin of 11.31% for the quarter that ended in Dec. 2016 => No sustainable 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.

Weatherford International PLC Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 2,774 3,358 2,369 2,631 3,310 3,360 2,961 3,450 1,412 560

Weatherford International PLC Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 992 819 592 374 368 78 111 164 126 159
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