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Operating Margins at Large Cos., 2013-16
Monday, February 20, 2017

Operating margin indicates how well a company is keeping its financial head above water. The more operating margin you have, the more profit you are earning per dollar and the more efficient your operations are.

Today Calcbench did some quick arithmetic to get a sense of how operating margins have changed among large U.S. filers in the last four years. The big headline: margins haven’t changed much.

We pulled up the revenue and operating income of all S&P 500 filers who have already filed their 2016 financial statements, and found 181 filers in total. (Recall that just last week, only 143 companies had filed their 2016 reports. The busy season is upon us, and we’ll be at the full 500 soon enough.) We pulled the data for four years, 2013-2016.

Then we divided operating income into total revenue for all 181 filers, and found the approximate operating margin and the change in margin over the last four years—or more accurately, the lack of change in operating margins, since they barely budged downward:

  • 2013: 12.70 percent
  • 2014: 12.33 percent
  • 2015: 12.45 percent
  • 2016: 12.47 percent

In that same period, total revenue for this group rose 10.66 percent, from $4.164 trillion in 2013 to $4.608 trillion last year. Total operating income rose 8.69 percent, from $528.7 billion to $574.7 billion.

We also looked at the change in operating margins individually for all 181 filers. The large majority (148 of 181 filers) had margins that swung less than 10 percentage points either up or down. Seventeen filers pushed their margins up by more than 10 points, and 15 saw their margins fall by more than 10 points.

Technically, the best improvement went to Hologic, but that’s because the company suffered a $906 million operating loss in 2013—which means its margin jumped 55.73 points, from -36.36 percent in 2013 to 19.37 percent last year. Second-best Reynolds American, however, pushed its margin from 38.03 percent to 84.53 percent.

The worst margin decline, meanwhile, went to Noble Energy: from 34.44 percent in 2013 to -38.24 percent last year. That is no surprise, given the punch energy companies have suffered in recent years thanks to low oil prices. Noble’s revenue fell from $4.8 billion in 2013 to only $3.39 billion last year, and it has suffered $3.77 billion in losses in the last two years alone.

One final note, for the financial data purists out there: yes, we know that you’re supposed to use net sales to calculate operating margin, rather than total revenue like we did here. As we said above, this analysis is only gives an approximate sense of operating margin—generally a very good approximation, but still just an estimate.

Net sales (revenue minus allowances for returned or damaged goods, and similar items) is something that Calcbench subscribers can determine themselves, by diving into the footnote disclosures. We just wanted to do some quick calculations to put everyone in the same operating margin ballpark. Which apparently is the same one we were in four years ago.


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