While some look forward to annual Oscar nominations, Nobel prize announcements and baseball Hall of Fame decisions, we at Boardroom Insiders eagerly anticipate the annual Fortune 500 list reveal. We look for trends, who is up, who is down, who is new, who is out. And then we get down to the business of profiling the top executives from the companies new to the Fortune 500.
The 63rd annual list includes 500 U.S.-based companies representing two-thirds of the United States GDP as well as $12 trillion in revenues, $890 billion in profits, $19 trillion in market value, and $28.2 million people employed globally.
As in many years past, Walmart tops the list, with revenues of nearly $486 billion. The Benton, Arkansas-based retailer has ranked first for 13 of the last 16 years— and with 2.3 million workers, it’s the list’s biggest employer. But, as Fortune pointed out, despite massive revenues, it ranks only 11th in profits--with $13.6 billion--which Fortune notes represents a lot of money but not such a great margin on all those sales.
Apple, with its number 3 ranking overall, showed up Walmart in one area—profits. Apple generated the list’s biggest profit: nearly $46 billion in 2016.
Another notable company on the list is Warren Buffett’s Berkshire Hathaway, which leapt over Apple to take position number two, and in so doing, enjoyed its biggest move up the list and its highest ranking ever.
Exxon Mobil ranks high on the list at number four, but it dropped from number two. That’s the lowest ranking the company has held since 1999. The reason is the fall in oil prices, thanks to a shale boom in the U.S., which has flooded the market.
This year’s list includes 32 companies led by women CEOs. While that’s a record number of women leaders and an improvement from 21 Fortune 500 CEOs the previous year, it reflects only 6.4 percent of the total. (We’ll address the gains of women CEOs in an upcoming post.)
States leading the country in Fortune 500 headquartered companies are New York, with 54 companies, California with 53, and Texas with 50.
Of the 500 firms on the list, 18 are still founder-led. These include Tesla, which just entered the list at number 383; Alphabet (27); and FedEx (58).
Can we make out any trends in this year’s list? Well, we can start with revenue growth. Overall revenues were up 0.5 percent, or $61 billion over 2015, which Monster.com notes is a reflection of the economy’s slow but steady growth. Employment is also up by a percentage point. And, as noted above, there was a marked gain in women CEOs.
But we can also point out some other trends.
- Technology companies continue to rise. Of the top 25 profit leaders, more than half are tech companies, Fortune reported. The 25 largest North American publicly traded IT companies climbed a combined 259 spots on the Fortune 500 list, according to CRN. Sales for the 25 IT vendors, distributors, and solution providers grew by a total of $49.4 billion, with profits increasing by $4.46 billion. Employees grew to nearly 3.09 million.
- Healthcare is becoming a bigger part of the U.S. economy and it’s reflected in the Fortune 500 this year. Three of the top 10 on the list are healthcare related—McKesson (5), United Health Group (6), and CVS Health (7). Within healthcare, the pharmacy services business group had the largest revenue and profit growth of any sector. Pharmaceutical businesses were the second most profitable sector with $68 billion in profits. As Fortune pointed out, with an aging population there’s a lot of demand for services and the expectation is that healthcare will stay near the top of the list for a long time.
- Six homebuilders made the list this year, led by D.R. Horton in the 232 position. According to Construction Dive, the continued recovery in the housing market and strong price growth across the country drove homebuilders’ strong performance last year.
The ultimate takeaway? As Inc. noted, America’s top companies are having a really good year. And as these companies are seen as wildly successful, said Inc., they tend to be good indicators of economic trends—so it’s worth paying attention to this list.
The Freshman Class
To get on the Fortune 500 list, a company has to post at least $5.1 billion in annual revenues. This year’s freshman class of 20 come from across the industry spectrum and their path to the list was varied. Among them, six were the result of recent splits or spinoffs. Two are brand new companies, created in 2016. And three were founded more than 100 years ago and finally made it to the top.
The newcomers include: Hewlett Packard Enterprise, Alcoa, Tesla Motors, Yum China Holdings, Adobe Systems, Michaels Cos., and Vistra Energy. HPE got on as a result of the 2015 split of HP. Vistra Energy was spun off from its parent company, which is now in Chapter 11 bankruptcy.
Who Got Knocked Off?
To make room for these newcomers, others had to go. This year 15 companies fell off the list, while a handful of others were acquired by other companies and no longer exist as independent businesses. These include Baxalta and Time Warner Cable.
What happened? Most got a whupping in revenues as a result of the prolonged oil glut. While it obviously impacted oil companies like Marathon Oil and Hess the most, it also took down companies that service them, like FMC Technologies, which sells oil exploration and extraction equipment; and Trinity Industries, which operates railway and construction businesses that, among other things, transports chemicals, petroleum, and coal. Private equity firm KKR’s fall from its position at 347 last year to 656 in the Fortune 1000, according to Fortune, was partly due to a poor-performing bet in energy exploration company Samson Resources. KKR’s revenues fell 55.6 percent in the year.
Other companies suffered as well. Gone for now are Barnes & Noble, Visteon, Ashland Global Holdings, Domtar, Navient, and Telephone & Data Systems.
Then again, the shift in the Fortune 500 could have been more pronounced. Last year 29 companies fell off the list.