Revenue Doesn't Equal Profits at Publicly Traded Companies

by Gwen Moritz  on Monday, Jun. 24, 2013 12:00 am  

(Editor's Note: An editing error led to an incorrectly sorted version of the Arkansas Public Companies' Annual Reports list being published in this week's print edition. A corrected version of that list has been uploaded here and linked in the story below. It is free to access.)

The stock market can be a mysterious place.

Four and a half years ago, Dillard’s Inc. stock was worth less than $3 a share and the entire company was valued at less than $200 million. Last week, Dillard’s was trading in the mid-80s after peaking above $93 last month and its market capitalization was more than $3.9 billion.

The turnaround in Dillard’s profitability explains a lot of that: The Little Rock retailer had an unusual $200 million loss in 2008 and earned $336 million in the year that ended in February of this year.

(Get the Lists: Click to get the list of Arkansas' public companies ranked by net income and public companies ranked by market capitalization. Also: the list of Arkansas' public financial institutions.) 

But earnings clearly aren’t everything. Windstream Corp. earned half as much as Dillard’s in its most recent fiscal year, which ended Dec. 31. But the market values the Little Rock telephone and data service provider more than the retailer; Windstream’s market capitalization is above $4.8 billion.

It’s no wonder Windstream executives have spent so much time reassuring investors that the company will continue paying a $1-per-share dividend, a breathtaking 12 percent yield on a stock whose price has gradually slipped to the $8 mark after trading above $14 in late 2010.

(What changes are happening at the top of public companies in Arkansas? See the slideshow above.)

This week, for the first time, Arkansas Business has added a list ranking the state’s publicly traded companies — currently 18 of them — by market capitalization. The 18 companies are also ranked, as usual, by net income (or, unfortunately, loss) in their most recently completed fiscal years. Those rankings are divided into two lists: 14 publicly traded corporations and four publicly traded banks.

WMT Stands Alone

No. 1 on the Arkansas Business list of public companies is also No. 1 among the Fortune 500 list of the biggest publicly traded companies: Wal-Mart Stores Inc. of Bentonville.

But Fortune magazine ranks companies by top-line revenue, whereas our list is ranked by the bottom line. Wal-Mart’s $469.2 billion in sales for the year that ended Jan. 31 is unprecedented and enough to take the top spot in the Fortune 500 back from ExxonMobil. But if Fortune ranked by profitability, as Arkansas Business does, Wal-Mart’s not-quite-$17 billion net income would merely be No. 7 — behind Exxon, Apple, Chevron, J.P. Morgan Chase & Co., Wells Fargo and Fannie Mae. When it comes to return on revenue, Apple stands alone: More than 26 percent of its $156.5 billion in revenue last year dropped straight to the bottom line. For discounter Wal-Mart, the margin was less than 4 percent.

(Upscale retailer Dillard’s, by contrast, had a profit margin of just more than 5 percent. A smidgen of its $6.6 billion in revenue and $336 million in profit came from the construction work done by its wholly owned subsidiary, CDI Contractors of Little Rock.)

Still, Wal-Mart’s $17 billion in profit represents 85 percent of the profit earned by Arkansas’ 18 publicly traded companies — even though a record six of them were also among the Fortune 500 this year.

Those include the four usuals: Wal-Mart, Tyson Foods Inc. of Springdale (No. 93), Murphy Oil Corp. of El Dorado (No. 104) and Dillard’s (No. 378). But for the first time, Windstream, thanks to a major acquisition, and J.B. Hunt Transport Services Inc. of Lowell eased in at No. 414 and No. 486 respectively.

Those six also happen to be the top six largest Arkansas public companies as ranked by profit, although not in the same order because the profit margins vary from less than 2 percent at Tyson to 10.5 percent at J.B. Hunt.



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