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GuruFocus has detected 3 Warning Signs with Halliburton Co $HAL.
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Halliburton Co (NYSE:HAL)
Gross Profit
$849 Mil (TTM As of Mar. 2017)

Halliburton Co's gross profit for the three months ended in Mar. 2017 was $258 Mil. Halliburton Co's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $849 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Halliburton Co's gross profit for the three months ended in Mar. 2017 was $258 Mil. Halliburton Co's revenue for the three months ended in Mar. 2017 was $4,279 Mil. Therefore, Halliburton Co's Gross Margin for the quarter that ended in Mar. 2017 was 6.03%.

Halliburton Co had a gross margin of 6.03% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Halliburton Co was 24.50%. The lowest was 5.32%. And the median was 16.73%.

Warning Sign:

Halliburton Co gross margin has been in long term decline. The average rate of decline per year is -20%.


Definition

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

Halliburton Co'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
=15887 - 15023
=864

Halliburton Co's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=4279 - 4021
=258

Halliburton Co Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 103 (Jun. 2016 ) + 171 (Sep. 2016 ) + 317 (Dec. 2016 ) + 258 (Mar. 2017 ) = $849 Mil.

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

Halliburton Co's Gross Margin for the quarter that ended in Mar. 2017 is calculated as

Gross Margin (Q: Mar. 2017 )=Gross Profit (Q: Mar. 2017 ) / Revenue (Q: Mar. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=258 / 4279
=6.03 %

* 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

Halliburton Co had a gross margin of 6.03% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Halliburton Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 3,7394,2302,1963,2385,0184,7344,4715,5362,520864

Halliburton Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 1,500765686543526273103171317258
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