5 Lean, Mean Profit Machines

by Marc Bastow | October 3, 2012 8:00 am

Despite the upbeat (if somewhat restrained) news on the unemployment front between the U.S. Department of Labor report last week and this week’s ADP report, the overall employment picture in the U.S. still is hazy.

Job growth still is scarce, with unemployment hovering in and around the 8% range now for almost three years. However, downsized companies (please don’t call it “rightsized”) have learned to do more with less, squeezing more productivity and profits out of fewer workers.

CNBC recently highlighted these “champions” of efficiency in its latest listing of the S&P 500’s Leanest Companies[1], which provides the best companies in terms of revenues per employee.

However, revenues aren’t everything — KB Home (NYSE:KBH[2]), for instance, made the list with $1,591,921 in annual revenue per employee, but the company wasn’t able to turn that into profitability, with the company averaging $478,769 in losses for each worker! So it’s worth pointing out the champions that didn’t just maximize revenues, but profits — where the rubber truly hits the road.

Here, we’ll look at five lean, mean profit machines that employ more than 1,000 workers:

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American Tower

American Tower NYSE:AMTEmployees: 1,198
Profit Per Employee: $208,207

American Tower (NYSE:AMT[4]) is a wireless and broadcast communications infrastructure company that owns, operates and develops communications sites, and leases antenna space on these sites to wireless service providers, radio and television broadcast companies, wireless data providers and governmental entities, among other customers.

With the growth of wireless, AMT has built a $2 billion business and a market cap of $28 billion as the owner or manager of 49,000 sites. Wall Street has taken notice, ginning shares up 20% year-to-date at a valuation of around 60 times earnings.

As a holding company, AMT’s profit per employee is helped by needing only a small work force to run its management and rental operations.

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GoogleEmployees: 20,164
Profit Per Employee: $214,768

Where to start with Google (NASDAQ:GOOG[5])? Basically anywhere, as the company has hit it out of the park since its founding in 1996 by Stanford University classmates Larry Page and Sergey Brin, who’s first crack at a search engine (initially called BackRub) used links to determine the importance of individual webpages.

That was roughly $37 billion in revenue and a market cap of $247 billion ago, and the success of the Google search engine is one of the great inventions of the modern era, plain and simple. Google’s Android system helps to run the mobile world, and the stock recently passed the $700 per share level. It’s safe to say Google is getting plenty of bang from its brilliant minds.

Google also is the largest employer on this list, but one of the most efficient — Google does little on the actual manufacturing side of things, and requires relatively little overhead for its big-money operation.

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CF Industries

CF Industries NYSE:CFEmployees: 1,500
Profit Per Employee: $391,133

CF Industries  (NYSE:CF[6]) makes and distributes nitrogen and phosphate fertilizer products across the world, dealing in things like ammonia, as well as tongue-twisters like diammonium phosphate and monoammonium phosphate.

Since its founding in 1946, CF has grown into the second-largest nitrogen fertilizer producer in the world and the third-largest phosphate fertilizer producer among public companies. All told, CF Industries is a $14 billion company whose scant 1,500 employees help bring in $1.7 billion in revenues annually.

But what makes CF so efficient is … well, its focus on efficiency: The company has cut expenses dramatically during the year, whittling nearly $100 million from the line to achieve to a nearly 60% profit margin. In addition, in 2011 the company generated enough free cashflow to purchase $1 billion of its own stock, a nice way to bump up EPS.

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Murphy Oil

Murphy Oil NYSE:MUREmployees: 3,206
Profit Per Employee: $436,883

Oil and gas exploration and production company Murphy Oil (NYSE:MUR[7]) is a relatively small[8] gasoline retailer and wholesaler with marketing operations in the U.S. and refining and marketing operations in the United Kingdom.

The company’s roots go back to 1907, when the first oil production was established in the Caddo Field in north Louisiana, and today, business activities are conducted by wholly owned subsidiaries while Murphy Oil Corporation acts as a holding company. All told, Murphy brings in just more than $7 billion in annual sales.

Murphy is reaping the benefits of a partnership with Wal-Mart (NYSE:WMT[9]), which allows it to operate gas stations that also carry snacks, beverages and tobacco products on Wal-Mart store locations. Margins on the snack side are strong, and the company is looking to expand the relationship further.

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Gilead Sciences

Gilead Sciences NASDAQ:GILDEmployees: 3,441
Profit Per Employee: $610,931

Biopharmacuetical company Gilead Sciences (NASDAQ:GILD[10]) is focused in treatments for HIV/AIDS, liver diseases such as hepatitis B and C, and cardiovascular/metabolic and respiratory conditions.

With revenues of more than $2 billion, the 25-year old company is well-positioned[11] in the biopharma world.

Premium pricings on its treatments help push Gilead forward on profit per employee, and its margins keep expanding.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. S&P 500’s Leanest Companies: http://www.cnbc.com/id/30888743/The_S_P_500_s_Leanest_Companies?slide=1
  2. KBH: http://studio-5.financialcontent.com/investplace/quote?Symbol=KBH
  3. Compare Brokers: https://investorplace.com/options-trading/broker-center/
  4. AMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMT
  5. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  6. CF: http://studio-5.financialcontent.com/investplace/quote?Symbol=CF
  7. MUR: http://studio-5.financialcontent.com/investplace/quote?Symbol=MUR
  8. relatively small: https://investorplace.com/2012/08/4-small-ball-oil-and-gas-dividend-players-xom-cvx-cop-rds-a-rds-b-mu/
  9. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  10. GILD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GILD)%20%20
  11. well-positioned: https://investorplace.com/2012/09/6-biotechnology-stocks-to-buy-now-incy-gild-exas/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InvestorPlace+%28InvestorPlace%29

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