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Energy Transfer Partners LP (NYSE:ETP)
Operating Income
$2,370 Mil (TTM As of Mar. 2015)

Energy Transfer Partners LP's operating income for the three months ended in Mar. 2015 was $583 Mil. Its operating income for the trailing twelve months (TTM) ended in Mar. 2015 was $2,370 Mil.

Warning Sign:

Energy Transfer Partners LP had operating loss over the past 3 years.

Operating margin is calculated as operating income divided by its revenue. Energy Transfer Partners LP's operating income for the three months ended in Mar. 2015 was $583 Mil. Energy Transfer Partners LP's revenue for the three months ended in Mar. 2015 was $9,530 Mil. Therefore, Energy Transfer Partners LP's operating margin for the quarter that ended in Mar. 2015 was 6.12%.

Warning Sign:

Energy Transfer Partners LP operating margin has been in 5-year decline. The average rate of decline per year is -31.2%.

Energy Transfer Partners LP's 3-Year average Growth Rate for operating margin was -31.20% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. Energy Transfer Partners LP's annualized return on capital for the quarter that ended in Mar. 2015 was 7.15%. Energy Transfer Partners LP's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Mar. 2015 was 7.15%.


Definition

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Energy Transfer Partners LP's Operating Income for the fiscal year that ended in Dec. 2014 is calculated as

Operating Income(A: Dec. 2014 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=51158-47176-377
-Research & Development-Depreciation, Depletion & Amortization-Others
-0-1130-0
=2,475

Energy Transfer Partners LP's Operating Income for the quarter that ended in Mar. 2015 is calculated as

Operating Income(Q: Mar. 2015 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=9530-8525-100
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-0-322-0
=583

Operating Income(Q: Mar. 2015 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=871-322--34
=583

Energy Transfer Partners LP Operating Income for the trailing twelve months (TTM) ended in Mar. 2015 was 736 (Jun. 2014 ) + 668 (Sep. 2014 ) + 383 (Dec. 2014 ) + 583 (Mar. 2015 ) = $2,370 Mil.

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


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition.

Energy Transfer Partners LP's annualized Return on Capital (ROC) for the quarter that ended in Mar. 2015 is calculated as:

Return on Capital (ROC)(Q: Mar. 2015 )
=NOPAT/Average Invested Capital
=Oper. Inc.*(1-Tax Rate)/( (Invested Capital (Q: Dec. 2014 ) + Invested Capital (Q: Mar. 2015 ))/2)
=2332 * ( 1 - 4.05% )/( (30771 + 31814)/2)
=2237.554/31292.5
=7.15 %

where

Invested Capital(Q: Dec. 2014 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=18332 + 1008 + 12070 - 639
=30771

Invested Capital(Q: Mar. 2015 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=20430 + 269 + 12966 - 1851
=31814

Note: The Operating Income data used here is four times the quarterly (Mar. 2015) operating income data.

2. Joel Greenblatt’s definition of Return on Capital:

Energy Transfer Partners LP's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Mar. 2015 is calculated as:

ROC (Joel Greenblatt’s)(Q: Mar. 2015 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Net PPE+Net Working Capital)
     Q: Dec. 2014  Q: Mar. 2015
=EBIT/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=2196/( ( (29743 + max(-232, 0)) + (31649 + max(-83, 0)) )/2 )
=2196/( ( 29743 + 31649 )/2 )
=2196/30696
=7.15 %

where Working Capital is:

Working Capital(Q: Dec. 2014 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(2879 + 1389 + 532) - (4556 + 181 + 295)
=-232

Working Capital(Q: Mar. 2015 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(2464 + 1388 + 503) - (4048 + 174 + 216)
=-83

When net working capital is negative, 0 is used.

Note: The Earnings Before Interest and Taxes (EBIT) data used here is four times the quarterly (Mar. 2015) EBIT data.

3. Operating Income is also linked to Operating Margin:

Energy Transfer Partners LP's Operating Margin for the quarter that ended in Mar. 2015 is calculated as:

Operating Margin=Operating Income (Q: Mar. 2015 )/Total Revenue (Q: Mar. 2015 )
=583/9530
=6.12 %

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


Be Aware

Compared with a company’s EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company’s revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)’s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia’s Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus’s Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms

Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense, Research & Development, Gross Profit, EBITDA, Depreciation, Depletion and Amortization, Return on Capital, Return on Capital (Joel Greenblatt’s), Earnings Yield, Operating Margin, EBIT


Historical Data

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

Energy Transfer Partners LP Annual Data

Aug05Aug06Aug07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Operating Income 3126438301,1181,1281,0581,2471,3941,5412,475

Energy Transfer Partners LP Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
Operating Income 463534632526-151688736668383583
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