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FinanceFortune 500

The Fortune 500’s 10 Most Profitable Companies

By
Jen Wieczner
Jen Wieczner
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By
Jen Wieczner
Jen Wieczner
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June 7, 2017, 6:30 AM ET
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The 63rd edition of the Fortune 500, our annual list featuring the largest and most successful American companies, was published on Wednesday. But as our roster is a ranking of corporations by revenues, there’s no requirement for profitability: Indeed, 61 companies on this year’s list—or 12%—lost money last year. Still, the Fortune 500 as a group grew profits 6% in 2016, collectively earning nearly $890 billion.

At the high end, the Fortune 500’s biggest earners boast bottom lines larger than many world economies, with profits eclipsing the gross domestic product (GDP) of countries such as Tanzania and Iceland. And some of the companies that rank among the most profitable in the 500 may surprise you, as they are nowhere near the top in terms of sales. Meanwhile Walmart (WMT), which at No. 1 on the Fortune 500 has more than twice as much revenue as any other company on the list, doesn’t even make the top 10 when it comes to profits. Even without tax reform and other political changes that are expected to boost earnings further, these 10 companies are making the most money in all of corporate America.

1. Apple

Fortune 500 Rank: No. 3
2016 Profits: $45.7 billion
% of Revenues (Margin): 21%

Though its profits sank 14% last year, Apple (AAPL) still managed to maintain its status as the Fortune 500’s most profitable company for the third year in a row. Indeed, even after declines in iPhone and iPad sales led its revenues to fall nearly 8%, to $215.6 billion, Apple still has more money on hand than it has so far figured out what to do with, to the tune of more than $250 billion in cash. Apple plans to return some $13 billion of that hoard to shareholders in the coming year in the form of dividends, making it the highest dividend-paying stock in the world.

2. J.P. Morgan Chase

Fortune 500 Rank: No. 21
2016 Profits: $24.7 billion
% of Revenues (Margin): 23%

Rising interest rates, even the Federal Reserve’s modest recent hikes, have given J.P. Morgan Chase (JPM) a meaningful bump. Now the biggest American bank by any measure, J.P. Morgan grew revenue more than 4% last year to $105.5 billion, while also boosting profits more than 1%. With CEO Jamie Dimon an outspoken proponent of regulatory reform, particularly when it comes to the banking sector, J.P. Morgan’s earnings are likely to grow further if President Trump and Congress lift some of the capital requirements and other limitations imposed on banks after the financial crisis.

3. Berkshire Hathaway

Fortune 500 Rank: No. 2
2016 Profits: $24.1 billion
% of Revenues (Margin): 11%

Warren Buffett’s conglomerate Berkshire Hathaway (BRK-A) jumps up two spots to its highest Fortune 500 rank in history this year, after growing revenues 6% in 2016. Though Berkshire’s profits were flat for the year (with modest growth from some of its underlying insurance and energy businesses offset by a 16% earnings decline at its Burlington Northern Santa Fe railroad, and slightly smaller stock market profits), its more than $24 billion bottom line means it holds last year’s spot as the Fortune 500’s third most profitable company.

4. Wells Fargo

Fortune 500 Rank: No. 25
2016 Profits: $21.9 billion
% of Revenues (Margin): 23%

The bank paid more than $185 million to the government and consumers to resolve its fake accounts scandal, contributing to a more than 4% decline in 2016 profits. But Wells Fargo still netted nearly $22 billion in earnings last year. One of the largest consumer banks in America, Wells Fargo (WFC) is also benefiting from higher interest rates, and its sales grew almost 5% in 2016.

5. Alphabet

Fortune 500 Rank: No. 27
2016 Profits: $19.5 billion
% of Revenues (Margin): 22%

Google’s parent company moved up nine spots on the Fortune 500 this year thanks to a banner 2016 in which sales increased more than 20%, and earnings grew nearly as much, blowing past Wall Street’s expectations. The core Google (GOOGL) search and advertising business provided a hefty cushion for Alphabet’s so-called other bets, which include everything from biotech unit Calico to self-driving car division Waymo. Though such moonshots managed to generate 81% more revenue in 2016 compared to the year before, they also had higher losses, of $3.6 billion—and they still account for less than 1% of Alphabet’s overall sales.

6. Bank of America

Fortune 500 Rank: No. 26
2016 Profits: $17.9 billion
% of Revenues (Margin): 19%

Higher interest rates are likely to benefit Bank of America (BAC) more than any other U.S. bank, and in 2016, the company recorded its most profitable year since the financial crisis and the second-biggest profit in its history. (Bank of America has yet to surpass its record performance in 2006, when it earned $21 billion.) Illustrating how even small Fed rate hikes can have an outsized impact on the bottom line of a company like Bank of America—which makes money by collecting higher interest payments on loans while paying out a much smaller amount on consumers’ savings deposits—the bank boosted profits nearly 13% last year, even though its sales were basically flat.

7. Microsoft

Fortune 500 Rank: No. 28
2016 Profits: $16.8 billion
% of Revenues (Margin): 20%

Though Microsoft falls three spots on the Fortune 500 this year after a nearly 9% sales decline in 2016, its aggressive cost cuts (including 7,800 layoffs announced in 2015) are paying off for the company’s bottom line: Microsoft (MSFT) grew profits almost 38% last year, beating Wall Street expectations. It wasn’t just the cutbacks that made the difference. The company also attributed its impressive earnings to its booming cloud services business Azure, which is now competitive with the huge cloud-services division Amazon (AMZN) and is much more profitable than Microsoft’s legacy technology products.

8. Johnson & Johnson

Fortune 500 Rank: No. 35
2016 Profits: $16.5 billion
% of Revenues (Margin): 23%

The sprawling health care conglomerate is one of just 54 companies that have made it on the Fortune 500 every single year the list has been published. Johnson & Johnson (JNJ) also managed to expand its pre-tax profit margins in both its consumer products and pharmaceutical businesses last year. That, plus a reduction in its effective income tax rate (to 16.5% in 2016, down from 19.7% the year before) due to an accounting change, contributed to a more than 7% increase in 2016 profits, while sales grew less than 3%.

9. Citigroup

Fortune 500 Rank: No. 30
2016 Profits: $14.9 billion
% of Revenues (Margin): 18%

After carrying out a deliberate and gradual plan to shrink and simplify the company, including divesting much of its Latin America business, Citigroup (C) declared its restructuring efforts complete in 2016. That left the bank with lower revenues (down nearly 7% to $82.4 billion last year) and profits (down almost 14%), as expected, but Citi CEO Michael Corbat still felt obliged to say in the company’s annual report that “our performance last year fell short.” Investors didn’t seem to agree: Citi stock gained nearly 16% in 2016, as the bank also returned more money to shareholders in the form of an increased dividend and stock buybacks.

10. Altria Group

Fortune 500 Rank: No. 148
2016 Profits: $14.2 billion
% of Revenues (Margin): 74%

Altria, the tobacco company formerly known as Philip Morris, catapulted into the ranks of the Fortune 500’s most profitable companies with a massive 172% increase in net income in 2016. But don’t expect Altria (MO) to keep its place on this list too long: The bulk of the company’s profits last year came from a one-time windfall on Altria’s 27% ownership stake in beer maker SABMiller. When Anheuser-Busch InBev completed its takeover of SABMiller in the fall, Altria reaped a $13.9 billion gain, representing $9 billion—and the vast majority—of its 2016 earnings after taxes. Not counting the gains from the mega-merger, Altria grew its operating income almost 5% last year.

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By Jen Wieczner
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