(USA Today) -- Investors obsess over which companies beat or missed expectations during earnings season, which is winding down this week. But consumers might be more surprised to find out which companies are finding ways to extract the most profit from them.
Just 10 companies in the Standard & Poor’s 500, including Gilead Sciences, tobacco company Philip Morris International and drugmaker Pfizer, are hauling in 40% profit margins or higher in consumer-facing sectors, based on a USA TODAY analysis of data from S&P Capital IQ.
For the analysis, USA TODAY examined the so-called EBITDA profit margin, which measures how much companies keep of every dollar in revenue after paying direct and overhead costs, but not including interest, taxes or non-cash expenses like wear and tear on equipment. The analysis looks at profit margins over the past 12 months at consumer staples, consumer discretionary and health-care companies. EBITDA margins are often used since they measure businesses’ core profitability more meaningfully. Profit margins measured this way can also compared across different industries with varying financing and capital investment structures.
Smokers are definitely a source of smoking profit margins. Big tobacco companies, like Phillip Morris International, Altria and Lorillard, make the list. Even Apple, with its high priced gadgets, can’t match and keeps 33 cents of every dollar in sales. That’s high, but still not to the level of these companies. Technology was not included since most of the companies get big portions of their profit selling to businesses.
It’s not just tobacco companies with high profit margins. Drugmakers command massive profit margins creating treatments consumers need to stay alive. Gilead Sciences, a biotech company with treatments for infections, commands a 52% EBITDA profit margin. Biogen Idec therapies for multiple sclerosis and other terrible diseases hauls in a 43% profit margin.
Marriott is one company with massive profit margins that’s not a tobacco or healthcare company. The hotel chain’s profit margin benefitted from the fact it makes it money franchising and licensing. Collecting fees is more lucrative than actually operating hotels. Marriott, though, is a good example of how profit margins vary based on the way they are calculated. The company’s profit margin measured on a continuing operations basis, which factors in gains and losses from property sales, is lower at 26%.
And forget about America’s Best Cook. The company that owns Food Network, Scripps Networks, has a 44% profit margins. Now that’s tasty.
Investors often say they look for companies to buy stock in that have sky-high profit margins. Highly profitable companies make products or provide services where there great ability to raise prices, while keep a lid on prices.
But this year, these highly highly profitable companies aren’t beating the stock market. The group of 10 companies is up 1.1% this year, trailing the 2.2% gain of the S&P 500. And over the past 12 months, these stocks are up 14.4% on average, just barely ahead of the 13.1% gain of the S&P 500.
|Company||Symbol||EBITDA Margin %||Stock ch. YTD|
|Philip Morris Int’l||PM||46.7%||-1.6%|
Source: S&P Capital IQ