Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
CSX Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,863 – 17.02% × 38,278 = -1,650
The analysis of economic value added indicates that the company failed to generate positive economic profit throughout the period from 2018 to 2022. Despite growth in operational earnings, the returns were insufficient to cover the cost of the capital employed, resulting in a consistent erosion of shareholder value in economic terms.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trajectory, rising from 4,106 million USD in 2018 to 4,863 million USD in 2022. A significant contraction occurred in 2020, where profit fell to 3,545 million USD, representing the lowest point in the five-year series. However, a strong recovery followed in 2021 and 2022, with the latter year marking the highest operational profit in the observed period.
- Invested Capital and Cost of Capital
- Invested capital grew steadily from 34,219 million USD in 2018 to 38,278 million USD by 2022, indicating continuous investment in the asset base. During this time, the cost of capital remained relatively stable, fluctuating within a narrow range between 16.30% and 17.02%. The relative stability of this high hurdle rate means that any increase in invested capital required a proportional and significant increase in NOPAT to avoid further economic losses.
- Economic Profit Trajectory
- Economic profit remained negative across all five years, signaling that the company did not earn enough to satisfy its cost of capital. The deficit peaked in 2020 at -2,590 million USD, a result of the simultaneous decline in NOPAT and an increase in invested capital. Since 2020, there has been a gradual improvement, with the economic loss narrowing to -1,650 million USD by 2022. This indicates that while the company is moving toward a positive economic value added state, the current operational returns still do not exceed the capital charges.
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Net Operating Profit after Taxes (NOPAT)
CSX Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in equity equivalents to net earnings.
4 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 557 × 5.00% = 28
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 770 × 21.00% = 162
6 Addition of after taxes interest expense to net earnings.
7 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 42 × 21.00% = 9
8 Elimination of after taxes investment income.
The financial trajectory between 2018 and 2022 is characterized by a period of relative stability, a notable contraction in 2020, and a subsequent strong recovery through 2022.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT demonstrated a growth pattern interrupted by a decline in 2020, where the value dropped to 3,545 million US$ from 4,174 million US$ in the previous year. A significant recovery followed, with NOPAT expanding to 4,534 million US$ in 2021 and reaching a period high of 4,863 million US$ by the end of 2022.
- Net Earnings Performance
- Net earnings mirrored the trend observed in NOPAT, experiencing a decrease to 2,765 million US$ in 2020. This was followed by an aggressive upward trend, with net earnings climbing to 3,781 million US$ in 2021 and further increasing to 4,166 million US$ in 2022, representing a substantial recovery from the 2020 trough.
- Comparative Analysis of Profitability Metrics
- A consistent positive variance exists between NOPAT and net earnings across all five years. NOPAT remained higher than net earnings throughout the period, indicating that the core operating profitability, after taxes, consistently exceeded the final net income. This gap suggests the influence of non-operating items or financing costs on the final earnings figures.
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Cash Operating Taxes
CSX Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
An analysis of tax expenditures between 2018 and 2022 reveals a non-linear trend characterized by a moderate decline leading into 2020, followed by a sharp increase through 2022.
- Cash Operating Tax Trajectory
- Cash operating taxes remained relatively stable between 2018 and 2020, fluctuating between US$ 842 million and US$ 862 million. A significant inflection point occurred in 2021, where cash operating taxes rose to US$ 1,159 million, continuing upward to reach a period peak of US$ 1,284 million by December 31, 2022.
- Comparative Analysis of Tax Metrics
- Income tax expense followed a similar trajectory, decreasing from US$ 995 million in 2018 to a low of US$ 862 million in 2020 before climbing to US$ 1,248 million in 2022. While income tax expense generally exceeded cash operating taxes from 2018 to 2021, the relationship inverted in 2022, with cash operating taxes exceeding accounting tax expense by US$ 36 million.
- Growth Patterns and Volatility
- The most substantial growth phase occurred between 2020 and 2021, during which cash operating taxes increased by approximately 37.6%. This sharp increase aligns with the trend observed in income tax expense, indicating a synchronized rise in both accounting and cash-based tax obligations during the latter part of the period.
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Invested Capital
CSX Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of equity equivalents to shareholders’ equity, attributable to CSX.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investments at fair value.
Invested capital demonstrated a consistent upward trajectory between 2018 and 2022, growing from US$ 34,219 million to US$ 38,278 million. The most pronounced expansion occurred between 2019 and 2020, where invested capital increased by approximately 8.1%.
- Total Reported Debt and Leases
- Debt levels showed a general increase over the observed period, rising from US$ 15,060 million in 2018 to US$ 18,604 million by the end of 2022. Although a marginal contraction occurred in 2021, the subsequent year saw a significant increase of approximately 10%, indicating a heightened reliance on debt and lease obligations in the final year.
- Shareholders' Equity
- Equity attributable to CSX exhibited volatility over the five-year span. After an initial decline in 2019, equity grew to a peak of US$ 13,490 million in 2021. However, a contraction was noted in 2022, with equity falling to US$ 12,615 million, reversing the gains made in the preceding two years.
- Capital Structure Trends
- The growth in the total invested capital base was not uniformly distributed across its components. By 2022, the increase in invested capital was driven primarily by the rise in reported debt and leases, as this growth coincided with a reduction in shareholders' equity. This divergence suggests a strategic shift toward higher leverage to maintain and expand the capital base during the final period of analysis.
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Cost of Capital
CSX Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 65,323) | 65,323) | ÷ | 82,015) | = | 0.80 | 0.80 | × | 20.51% | = | 16.33% | ||
| Long-term debt, including current maturities3 | 16,135) | 16,135) | ÷ | 82,015) | = | 0.20 | 0.20 | × | 4.22% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 557) | 557) | ÷ | 82,015) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 82,015) | 1.00 | 17.02% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 77,142) | 77,142) | ÷ | 97,123) | = | 0.79 | 0.79 | × | 20.51% | = | 16.29% | ||
| Long-term debt, including current maturities3 | 19,439) | 19,439) | ÷ | 97,123) | = | 0.20 | 0.20 | × | 4.22% × (1 – 21.00%) | = | 0.67% | ||
| Operating lease liability4 | 542) | 542) | ÷ | 97,123) | = | 0.01 | 0.01 | × | 4.90% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 97,123) | 1.00 | 16.98% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 67,230) | 67,230) | ÷ | 88,806) | = | 0.76 | 0.76 | × | 20.51% | = | 15.52% | ||
| Long-term debt, including current maturities3 | 21,076) | 21,076) | ÷ | 88,806) | = | 0.24 | 0.24 | × | 4.02% × (1 – 21.00%) | = | 0.75% | ||
| Operating lease liability4 | 500) | 500) | ÷ | 88,806) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 88,806) | 1.00 | 16.30% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 61,519) | 61,519) | ÷ | 80,572) | = | 0.76 | 0.76 | × | 20.51% | = | 15.66% | ||
| Long-term debt, including current maturities3 | 18,503) | 18,503) | ÷ | 80,572) | = | 0.23 | 0.23 | × | 4.42% × (1 – 21.00%) | = | 0.80% | ||
| Operating lease liability4 | 550) | 550) | ÷ | 80,572) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 80,572) | 1.00 | 16.49% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 55,544) | 55,544) | ÷ | 70,761) | = | 0.78 | 0.78 | × | 20.51% | = | 16.10% | ||
| Long-term debt, including current maturities3 | 14,914) | 14,914) | ÷ | 70,761) | = | 0.21 | 0.21 | × | 4.53% × (1 – 21.00%) | = | 0.75% | ||
| Operating lease liability4 | 303) | 303) | ÷ | 70,761) | = | 0.00 | 0.00 | × | 16.20% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 70,761) | 1.00 | 16.91% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
CSX Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (1,650) | (1,857) | (2,590) | (1,563) | (1,679) | |
| Invested capital2 | 38,278) | 37,644) | 37,637) | 34,802) | 34,219) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.31% | -4.93% | -6.88% | -4.49% | -4.91% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.19% | -3.65% | — | — | — | |
| Uber Technologies Inc. | -73.67% | -22.83% | — | — | — | |
| Union Pacific Corp. | -1.44% | -2.31% | — | — | — | |
| United Airlines Holdings Inc. | -3.34% | -10.26% | — | — | — | |
| United Parcel Service Inc. | 11.71% | 17.54% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,650 ÷ 38,278 = -4.31%
4 Click competitor name to see calculations.
The financial analysis from 2018 to 2022 reveals a persistent inability to generate positive economic value, characterized by negative economic profit and a negative economic spread ratio throughout the entire five-year period.
- Economic Profit Trends
- Economic profit remained consistently negative, indicating that the returns generated were insufficient to cover the total cost of capital. A significant deterioration was observed in 2020, when economic profit reached its lowest point at -2,590 million US$. Following this trough, a gradual recovery trend emerged, with the deficit narrowing to -1,650 million US$ by the end of 2022.
- Invested Capital Expansion
- A steady increase in invested capital is observed, rising from 34,219 million US$ in 2018 to 38,278 million US$ in 2022. This growth reflects a continuous expansion of the capital base over the period, despite the lack of positive economic value creation.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative throughout the period, confirming that the return on invested capital was consistently below the cost of capital. The ratio experienced a sharp decline in 2020, hitting a minimum of -6.88%. However, a corrective trend followed, with the ratio improving to -4.31% by December 31, 2022, marking the highest value achieved during the analyzed timeframe, although it remained in negative territory.
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Economic Profit Margin
CSX Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (1,650) | (1,857) | (2,590) | (1,563) | (1,679) | |
| Revenue | 14,853) | 12,522) | 10,583) | 11,937) | 12,250) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -11.11% | -14.83% | -24.47% | -13.10% | -13.70% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -4.40% | -2.79% | — | — | — | |
| Uber Technologies Inc. | -37.76% | -21.03% | — | — | — | |
| Union Pacific Corp. | -3.47% | -6.17% | — | — | — | |
| United Airlines Holdings Inc. | -3.05% | -21.62% | — | — | — | |
| United Parcel Service Inc. | 5.23% | 8.01% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × -1,650 ÷ 14,853 = -11.11%
3 Click competitor name to see calculations.
Analysis of the five-year period ending December 31, 2022, reveals a consistent pattern of negative economic profit, indicating that the returns generated did not exceed the cost of capital. However, the trajectory shows a significant volatility peak in 2020 followed by a sustained recovery in both absolute economic profit and margin efficiency through 2022.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed period. A moderate improvement was observed from 2018 to 2019, followed by a substantial decline in 2020, where losses widened to 2,590 million USD. A recovery phase ensued, with economic profit improving to 1,857 million USD in 2021 and reaching its highest level of the period at 1,650 million USD by the end of 2022.
- Revenue Performance
- Revenue exhibited a V-shaped trend. After a slight decline between 2018 and 2019 and a more pronounced drop to 10,583 million USD in 2020, revenue grew aggressively. By 2022, revenue reached 14,853 million USD, marking a significant increase over the 2018 baseline and contributing to the recovery of the economic profit margin.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the fluctuations in absolute profit and revenue. The margin deteriorated sharply in 2020, reaching a low of -24.47%. Subsequent years showed steady improvement, with the margin narrowing to -14.83% in 2021 and further improving to -11.11% in 2022. This indicates a gradual reduction in the gap between the company's operating performance and its cost of capital.
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