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Johnson & Johnson (NYSE:JNJ)
Gross Margin
69.45% (As of Sep. 2015)

Gross Margin is calculated as gross profit divided by its revenue. Johnson & Johnson's gross profit for the three months ended in Sep. 2015 was $11,878 Mil. Johnson & Johnson's revenue for the three months ended in Sep. 2015 was $17,102 Mil. Therefore, Johnson & Johnson's Gross Margin for the quarter that ended in Sep. 2015 was 69.45%.

JNJ' s Gross Margin Range Over the Past 10 Years
Min: 67.78   Max: 72.27
Current: 69.27

67.78
72.27

During the past 13 years, the highest Gross Margin of Johnson & Johnson was 72.27%. The lowest was 67.78%. And the median was 69.85%.

JNJ's Gross Margin is ranked lower than
100% of the Companies
in the Global Drug Manufacturers - Major industry.

( Industry Median: vs. JNJ: 69.27 )

Johnson & Johnson had a gross margin of 69.45% for the quarter that ended in Sep. 2015 => Durable competitive advantage

The 5-Year average Growth Rate of Gross Margin for Johnson & Johnson was -0.30% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Johnson & Johnson's Gross Margin for the fiscal year that ended in Dec. 2014 is calculated as

Gross Margin (A: Dec. 2014 )=Gross Profit (A: Dec. 2014 ) / Revenue (A: Dec. 2014 )
=51585 / 74331
=(Revenue - Cost of Goods Sold) / Revenue
=(74331 - 22746) / 74331
=69.40 %

Johnson & Johnson's Gross Margin for the quarter that ended in Sep. 2015 is calculated as

Gross Margin (Q: Sep. 2015 )=Gross Profit (Q: Sep. 2015 ) / Revenue (Q: Sep. 2015 )
=11878 / 17102
=(Revenue - Cost of Goods Sold) / Revenue
=(17102 - 5224) / 17102
=69.45 %

* 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

Johnson & Johnson had a gross margin of 69.45% for the quarter that ended in Sep. 2015 => Durable competitive advantage


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

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

Johnson & Johnson Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross Margin 71.7670.9570.9670.2069.4968.6967.7868.6769.4069.27

Johnson & Johnson Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Gross Margin 69.5967.5669.8969.0270.7667.9469.6069.8869.4568.15
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