November 1, 2013

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Comparing Apple’s and Big Oil’s profits – in one chart

Apple is blowing and going.

By David Wogan

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This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American

I was reading the latest earnings reports from Royal Dutch Shell and ExxonMobil and thought it would be interesting to compare them with Apple, Inc. Profit margins for Shell and Exxon are shrinking despite high oil prices. I yield the floor to the New York Times:

Despite relatively high oil prices and slowly improving natural gas prices in the United States, the results for much of the oil and gas sector this earnings season have been mediocre. Large companies have generally been slow to take advantage of the boom in domestic shale oil drilling, leaving the field open to smaller and more agile companies like Continental Resources, Apache and Pioneer Natural Resources.

Before the summer, domestic refining had lifted profits for big integrated companies like Exxon Mobil and Shell. But more recently, abundant gasoline supplies have narrowed the margins that refineries gain from the difference between the cost of crude oil and wholesale and retail gasoline prices. Similarly, in Europe refining margins have been razor-thin because of too much capacity for existing demand resulting from the weak economy.

and:

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The results for Shell, Europe’s largest company by market capitalization, were particularly disheartening, with earnings excluding extraordinary items dropping 32 percent from last year’s quarter to $4.5 billion. Net income of $4.7 billion was down 35 percent.

Exxon Mobil, the largest American oil company, reported that its profits for the quarter were down 18 percent from last year despite slightly higher production. Revenue was down 2 percent, to $112.37 billion.

Exxon Mobil’s third-quarter net income of $7.87 billion was slightly better than analysts’ expectations.

Meanwhile Apple is blowing and going. Matthew Panzarino for Techcrunch:

Apple has just released its fiscal Q4 2013 earnings, reporting $37.5B in revenue, $7.5B in net profit representing $8.26 per share. That marks a year-over-year growth of 4.2 percent in revenue and 4.7 percent decline in EPS, with net profit down 8.6 percent year over year.

How do these stack up?

I think most people expect Apple to have such a large profit margin, but I was a little surprised at how much larger (at least percentage-wise) their take-home is compared with the oil guys. Something to keep in mind the next time you're in line at the gas station (or Apple Store) and grumbling about prices.

David Wogan is an engineer and policy researcher who writes about energy, technology, and policy.

David's academic and professional background includes a unique blend of technology and policy in the field of energy systems. Most recently, David worked at Austin Energy, a Texas municipal utility, implementing a Department of Energy stimulus grant related to energy efficiency. Previously, David was a member of the Energy & Climate Change team at the White House Council on Environmental Quality for the Obama Administration.

David holds two Master's degrees from The University of Texas at Austin in Mechanical Engineering and Public Affairs. While at UT, David was a researcher in the Webber Energy Group, where his research focused on advanced biofuel production to offset petroleum use in the transportation sector. David holds a Bachelor's of Science degree in Mechanical Engineering from The University of Texas at Austin, where he researched nuclear non-proliferation measurement technology.

David is a 2013 Aspen Institute Journalism Scholar, joining a select group of journalists from Slate, ABC News, and The New York Times.

David lives in Austin, Texas. Follow along on Twitter or email him at david.wogan@me.com.

More by David Wogan

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