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GuruFocus has detected 4 Warning Signs with Level 3 Communications Inc $LVLT.
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Level 3 Communications Inc (NYSE:LVLT)
Gross Profit
$4,103 Mil (TTM As of Mar. 2017)

Level 3 Communications Inc's gross profit for the three months ended in Mar. 2017 was $1,021 Mil. Level 3 Communications Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $4,103 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Level 3 Communications Inc's gross profit for the three months ended in Mar. 2017 was $1,021 Mil. Level 3 Communications Inc's revenue for the three months ended in Mar. 2017 was $2,048 Mil. Therefore, Level 3 Communications Inc's Gross Margin for the quarter that ended in Mar. 2017 was 49.85%.

Level 3 Communications Inc had a gross margin of 49.85% for the quarter that ended in Mar. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Level 3 Communications Inc was 60.63%. The lowest was 39.60%. And the median was 53.62%.


Definition

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

Level 3 Communications Inc'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
=8172 - 4071
=4,101

Level 3 Communications Inc's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=2048 - 1027
=1,021

Level 3 Communications Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 1041 (Jun. 2016 ) + 1021 (Sep. 2016 ) + 1020 (Dec. 2016 ) + 1021 (Mar. 2017 ) = $4,103 Mil.

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

Level 3 Communications Inc'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
=1,021 / 2048
=49.85 %

* 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

Level 3 Communications Inc had a gross margin of 49.85% for the quarter that ended in Mar. 2017 => Durable 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.

Level 3 Communications Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 2,4362,4922,1972,1572,6272,5252,6283,0023,9644,101

Level 3 Communications Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 8749741,0029871,0011,0191,0411,0211,0201,021
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