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Weatherford International PLC (NYSE:WFT)
Operating Margin
8.20% (As of Sep. 2014)

Operating margin is calculated as operating income divided by its revenue. Weatherford International PLC's operating income for the three months ended in Sep. 2014 was $318 Mil. Weatherford International PLC's revenue for the three months ended in Sep. 2014 was $3,877 Mil. Therefore, Weatherford International PLC's operating margin for the quarter that ended in Sep. 2014 was 8.20%.

Warning Sign:

Weatherford International PLC operating margin has been in 5-year decline. The average rate of decline per year is -30.7%.

WFT' s 10-Year Operating Margin Range
Min: 1.96   Max: 20.74
Current: 2.83

1.96
20.74
WFT's Operating Marginis ranked higher than
66% of the 480 Companies
in the Global Oil & Gas Equipment & Services industry.

( Industry Median: 9.93 vs. WFT: 2.83 )

Weatherford International PLC's 3-Year Average operating margin Growth Rate was -30.70% per year.

Weatherford International PLC's operating income for the three months ended in Sep. 2014 was $318 Mil. Its operating income for the trailing twelve months (TTM) ended in Sep. 2014 was $423 Mil.

Warning Sign:

Weatherford International PLC had operating loss over the past 3 years.


Definition

Operating margin - also known as operating income margin, operating profit margin and return on sales (ROS) - is the ratio of Operating Income divided by net sales or Revenue, usually presented in percent.

Weatherford International PLC's Operating Margin for the fiscal year that ended in Dec. 2013 is calculated as

Operating Margin=Operating Income (A: Dec. 2013 ) / Revenue (A: Dec. 2013 )
=523 / 15263
=3.43 %

Weatherford International PLC's Operating Margin for the quarter that ended in Sep. 2014 is calculated as

Operating Margin=Operating Income (Q: Sep. 2014 ) / Revenue (Q: Sep. 2014 )
=318 / 3877
=8.20 %

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


Explanation

Just like Gross Margin, it is important to see a company maintains its operating margin over time. Among the same industry, a company with higher operating margin is more efficient in its operation. It is also more stable during industry slowdown or recessions. Peter Lynch prefers those with higher margins than those with lower margins.


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

Gross Margin, Operating Income, Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense (SGA), Research & Development, Depreciation, Depletion and Amortization


Historical Data

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

Weatherford International PLC Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Operating Margin 12.8413.1720.5920.7420.617.787.5710.061.963.43

Weatherford International PLC Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Operating Margin -16.878.256.047.271.426.26-1.343.620.678.20
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