Alexander E.M. Hess and Thomas C. Frohlich

24/7 Wall St.

With the recent release of the iPhone 6 and iPhone 6 Plus, Apple is again the focus of the financial world. Already in its opening weekend, Apple (AAPL) sold 10 million iPhones, breaking its previous record.

With massive sales of cutting-edge, high-margin electronics, Apple is now the second most profitable company in the world. The only company with a higher profit is the Industrial and Commercial Bank of China. Based on data provided by FactSet on companies' net income before discontinued operations and extraordinary items for their latest fiscal year, these are the world's 20 most profitable companies.

Income from continuing operations — which excludes extraordinary and discontinued items from earnings — is an important indicator of the profitability of a company's core business. By contrast, net income, the standard all-encompassing measure of profits, can include items that do not reflect underlying profitability of a business.

For example, Vodafone (VOD) had $17.7 billion in net income from continuing operations, making it the 18th most profitable company in the world. However, this did not include the sale of its 45% stake in Verizon Wireless to Verizon Communications. Had these figures been included, Vodafone would have been the most profitable company in the world.

Of the 20 most profitable companies, nine are based in the United States. These include two banks, Wells Fargo (WFC) and JPMorgan Chase (JPM); two energy companies, Exxon Mobil (XOM) and Chevron (CVX); and two technology giants, Apple and Microsoft (MSFT). Conglomerate Berkshire Hathaway (BRK-B) is also among the most profitable companies.

In all, four industries account for the majority of companies among the world's most profitable. Seven companies are in the energy industry, led by Gazprom and ExxonMobil, the most of any sector. Six of the most profitable companies are banks, with four based in China, and two based in the U.S. Three telecom giants — AT&T (T), China Mobile (CHL), and Vodafone — are also among the 20 most profitable companies by normalized earnings. Finally, Apple joins Samsung Electronics and Microsoft to make up the technology companies on the list.

Overall, six companies on this list are based in China. Each of these companies is majority-owned by the Chinese government. The two Russian companies among the 20 most profitable companies, Gazprom and Rosneft, are also majority state-owned.

Being majority-owned by the government can serve as either a drag on profitability or a boost. Perhaps nowhere is this more evident than with the big four Chinese banks. All four of these banks — Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China — were among the eight most profitable companies in the world.

In order to determine the most profitable companies in the world, 24/7 Wall St. reviewed data on net Income before discontinued operations and extraordinary items, provided by FactSet. Data from FactSet is expressed in U.S. dollars, using the average annual exchange rate of local currencies against the dollar where applicable. However, different countries utilize different accounting standards, which can impact reported profits.

Information on company countries, industries and revenue is from S&P Capital IQ and is for the most recent fiscal year. Figures are translated by S&P Capital IQ using the effective exchange rate as of the end of each company's fiscal year. Additionally, revenues cover only consolidated subsidiaries. Many large companies have unconsolidated affiliates and investments that meaningfully contribute to earnings.

We have also provided currency translations in certain cases. Where this is the case, we used the exchange rate at the end of a company's fiscal year. Further, we also elected to remove Fannie Mae and Freddie Mac from consideration, since both entities are currently under the conservatorship of the Federal Housing Finance Agency. All profits earned by the firms go to the U.S. Treasury Department.

These are the most profitable companies in the world:

1. Industrial and Commercial Bank of China

> Net income from cont. operations: $42.7 billion

> Country: China

> Industry: Diversified banks

> Revenue: $89.4 billion

The Industrial and Commercial Bank of China is the world's most profitable company, with a net income from continuing operations of more than $42.7 billion last year. However, the profitability of the bank is somewhat dependent on government policy. Notably, in 2010, ICBC marketed a trust product, called "2010 China Credit / Credit Equals Gold #1." The product was not explicitly guaranteed by the bank. However, after considerable government pressure, the company lent money to an asset manager to bail out customers from the product. Concerns about such shadow financing have been building in China for a long time. While ICBC is massive, with continued growth in assets, it has substantial exposure to such potentially risky products. These products, under certain scenarios, could weigh heavily on profits in the future.

2. Apple

> Net income from cont. operations: $37.0 billion

> Country: United States

> Industry: Technology hardware, storage and peripherals

> Revenue: $170.9 billion

Apple may have posted the most extraordinary growth in net income among any of the most profitable companies in the world. In 2004, Apple made $276 million. Last year, that number rose to $37 billion. The company's recent growth has been fueled in large part by the iPhone. Last quarter, Apple sold more than 35.2 million iPhones, which produced $19.8 billion of the company's total revenue of $37.4 billion in the period. At least near term, the iPhone will likely remain the key to Apple's growth. The company sold 10 million units of the new iPhone 6 and iPhone 6 Plus in the first weekend they were available. The phones will be available in 69 countries and territories by the end of October. Because of its size, the most important of these markets is likely China, where newest iPhones will be available from all three of the country's largest wireless carriers.

3. Gazprom

> Net income from cont. operations: $35.7 billion

> Country: Russia

> Industry: Integrated oil and gas

> Revenue: $156.6 billion

Along with Rosneft, Gazprom is one of two of the world's 20 most profitable companies based in Russia. Like Rosneft, Gazprom is majority-owned by the Russian government, with government-controlled entities holding just over half of all shares. Gazprom claims to own the largest reserves of natural gas in the world and to account for 13% of global natural gas production. Gazprom also notes that its natural gas transmission network is the largest in the world, with roughly 168,900 kilometers of pipelines. The company is a massive exporter of gas throughout Europe. However, because of this, it is often viewed as a tool of Russian foreign policy in Europe, including in Ukraine.

4. China Construction Bank

> Net income from cont. operations: $34.9 billion

> Country: China

> Industry: Diversified banks

> Revenue: $76.9 billion

China Construction Bank is one of four Chinese banks among the eight most profitable companies in the world. Last year, the company reported more than 214 billion yuan in profits, or roughly $35 billion. Helping the bank generate such huge profits, China Construction Bank reported nearly 400 billion yuan in net interest income, or more than $64 billion. In addition to posting larger profits than its U.S. counterparts, the bank also had a return on equity of 21.2%, well above the 13.9% figure for Wells Fargo, America's most profitable bank. Like other major Chinese banks, China Construction Bank is majority state-owned.

5. Exxon Mobil

> Net income from cont. operations: $32.6 billion

> Country: United States

> Industry: Integrated oil and gas

> Revenue: $393.7 billion

ExxonMobil is the second largest company in the United States by income from continuing operations, trailing only Apple. It is also one of the largest companies in the world by market capitalization. The company's upstream segment which explores for and produces oil, accounted for the bulk of its earnings last year. ExxonMobil derived nearly $26 billion in income from its production activities last year, of which just under half came from equity affiliates — investments whose revenue and costs are not directly included in the income statement. In addition to its highly profitable upstream segment, ExxonMobil notes that it is "the world's largest refiner and marketer of petroleum products," and that "our chemical company ranks among the world's largest." While low oil prices may hurt the company's upstream segment, they could also potentially improve margins in its refining business.

6. Samsung Electronics

> Net income from cont. operations: $27.2 billion

> Country: South Korea

> Industry: Technology hardware, storage and peripherals

> Revenue: $216.6 billion

Samsung is, by far, the most profitable company in South Korea, with more than $27 billion in income from continuing operations last year. Although its smartphone market share declined in the last year, Samsung is still the largest smartphone maker in the world. Sales of Samsung smartphones accounted for 25% of the global market as of the second quarter of 2014, according to IDC. In the first half of this year, the company's information technology and mobile communications segment — which includes Samsung's phones — accounted for 57.4% of the company's sales. Of course, Samsung Electronics makes far more than just phones. It also makes monitors, digital cameras, washing machines, and more. Samsung Electronics is one of many companies bearing the Samsung name and is considered part of the Samsung Group: a network of companies, called a chaebol in South Korea, with complex cross-holdings between member firms.

7. Agricultural Bank of China

> Net income from cont. operations: $27.1 billion

> Country: China

> Industry: Diversified banks

> Revenue: $68.2 billion

The Agricultural Bank of China is one of the big four Chinese banks, all of which are among the eight most profitable companies in the world. Until the recent public offering by e-commerce giant Alibaba, ABC held the record for largest IPO in history, after raising more than $19 billion in 2010. ABC and its cohorts have benefited from China's move in the 1990s to establish a number of asset management companies, which buy bad loans from the Chinese banking system. However, after the most recent surge in Chinese lending, which was directed by the country's government, worries have arisen that the Chinese financial system may be loaded with bad debt.

8. Bank of China

> Net income from cont. operations: $25.5 billion

> Country: China

> Industry: Diversified banks

> Revenue: $63.3 billion

Bank of China traces its history back to 1912, when its founding was approved by the founding father of the Republic of China, Sun Yat-sen. The bank has had several roles throughout its history. Until 1949, it served as China's central bank. Thereafter, it managed the country's foreign exchange operations. In 1994, it became a fully state-owned commercial bank, and in 2006, it offered shares on exchanges in both Hong Kong and Shanghai. The bank has grown to a massive size and reported net income from continuing operations exceeding $25.5 billion in 2013. At the end of last year, Bank of China was still more than two-thirds owned by the Chinese government through a state-owned enterprise.

9. BP

> Net income from cont. operations: $23.5 billion

> Country: United Kingdom

> Industry: Integrated oil and gas

> Revenue: $379.6 billion

BP was the third most profitable energy company in the world, with more than $23 billion in profits from continuing operations. This was despite the fact that the Gulf of Mexico oil spill continued to weigh on its profitability. Charges associated with the spill lowered the bottom line by $396 million, although this was down from charges of almost $5 billion in 2012. Last year, BP also recorded a gain of $12.5 billion on the sale of its 50% stake in TNK-BP. Such gains are hardly one-time events for the company, which has recorded billions in gains from such sales in each of its last three fiscal years. In return for selling TNK-BP to Rosneft, BP also grew its stake in the Russian oil giant to nearly 20%. Rosneft is also one of the most profitable companies in the world.

10. Microsoft

> Net income from cont. operations: $22.1 billion

> Country: United States

> Industry: Systems software

> Revenue: $86.8 billion

Microsoft has long been a giant in the technology industry, as well as one of its most profitable companies. The majority of Microsoft's operating income is derived from its commercial business segments, which licenses its products to businesses, including Office for Business, Windows operating system, and its server products. Last year, across its consumer and commercial segments, Office, Windows, and server products and tools accounted for more than $58 billion of the company's $86 billion in revenue. Going forward, however, investors are likely to look for growth from Microsoft's phones and tablets, as well as from its cloud computing services.

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