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GuruFocus has detected 3 Warning Signs with TechnipFMC PLC $FTI.
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TechnipFMC PLC (NYSE:FTI)
Gross Profit
$1,740 Mil (TTM As of Mar. 2017)

TechnipFMC PLC's gross profit for the three months ended in Mar. 2017 was $405 Mil. TechnipFMC PLC's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $1,740 Mil.

Gross Margin is calculated as gross profit divided by its revenue. TechnipFMC PLC's gross profit for the three months ended in Mar. 2017 was $405 Mil. TechnipFMC PLC's revenue for the three months ended in Mar. 2017 was $3,391 Mil. Therefore, TechnipFMC PLC's Gross Margin for the quarter that ended in Mar. 2017 was 11.95%.

TechnipFMC PLC had a gross margin of 11.95% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of TechnipFMC PLC was 19.48%. The lowest was 8.13%. And the median was 16.46%.

Warning Sign:

TechnipFMC PLC gross margin has been in long term decline. The average rate of decline per year is -6.9%.


Definition

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

TechnipFMC PLC's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

Gross Profit (A: Dec. 2015 )=Revenue - Cost of Goods Sold
=11261.328976 - 9686.49237473
=1,575

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

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=3390.8631016 - 2985.72085561
=405

TechnipFMC PLC Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 393.033407572 (Mar. 2016 ) + 465.730337079 (Jun. 2016 ) + 476.543209877 (Sep. 2016 ) + 405.142245989 (Mar. 2017 ) = $1,740 Mil.

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

TechnipFMC PLC'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
=405 / 3390.8631016
=11.95 %

* 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

TechnipFMC PLC had a gross margin of 11.95% 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.

TechnipFMC PLC Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 9579341,5401,6651,5671,6932,0362,1741,8101,575

TechnipFMC PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Mar17
Gross_Profit 526427364299513421393466477405
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