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 – 16.95% × 38,278 = -1,624
The analysis of financial performance from 2018 to 2022 reveals a persistent trend of negative economic profit, indicating that the entity failed to generate returns exceeding its cost of capital throughout the five-year period. While operational profitability showed recovery in later years, the overall economic value added remained negative.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a fluctuating trend, starting at 4,106 million in 2018 and reaching a peak of 4,863 million by 2022. A notable contraction occurred in 2020, where NOPAT declined to 3,545 million, followed by a strong recovery in 2021 and 2022.
- Capital Investment and Cost of Capital
- Invested capital showed a consistent upward trajectory, increasing from 34,219 million in 2018 to 38,278 million in 2022. During this period, the cost of capital remained relatively stable, fluctuating within a narrow range between 16.24% and 16.95%, suggesting a constant hurdle rate for investment returns.
- Economic Profit Trends
- Economic profit remained negative across the entire observation window, signaling that the cost of invested capital consistently outweighed the net operating profit. The deficit peaked in 2020 at -2,565 million, coinciding with the lowest recorded NOPAT and a simultaneous increase in invested capital. Although the economic profit improved to -1,624 million by 2022, the continued negative values indicate that the growth in NOPAT was insufficient to offset the capital charges associated with the expanding invested capital base.
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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 | × | 20.42% | = | 16.26% | ||
| 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 | 16.95% | ||||||||||
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 | × | 20.42% | = | 16.22% | ||
| 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 | 16.91% | ||||||||||
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 | × | 20.42% | = | 15.46% | ||
| 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 | 16.24% | ||||||||||
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 | × | 20.42% | = | 15.59% | ||
| 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 | 16.42% | ||||||||||
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 | × | 20.42% | = | 16.03% | ||
| 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 | 16.84% | ||||||||||
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 | (1,624) | (1,831) | (2,565) | (1,541) | (1,656) | |
| Invested capital2 | 38,278) | 37,644) | 37,637) | 34,802) | 34,219) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.24% | -4.86% | -6.82% | -4.43% | -4.84% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.13% | -3.58% | — | — | — | |
| Uber Technologies Inc. | -73.60% | -22.77% | — | — | — | |
| Union Pacific Corp. | -1.44% | -2.30% | — | — | — | |
| United Airlines Holdings Inc. | -3.31% | -10.24% | — | — | — | |
| United Parcel Service Inc. | 11.75% | 17.57% | — | — | — | |
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 × -1,624 ÷ 38,278 = -4.24%
4 Click competitor name to see calculations.
An evaluation of the economic value added metrics from 2018 to 2022 reveals a persistent inability to generate positive economic profit. Despite a consistent increase in invested capital, the economic spread ratio remained negative throughout the entire period, indicating that the return on invested capital did not exceed the weighted average cost of capital.
- Economic Profit Performance
- Economic profit remained negative for five consecutive years, with values fluctuating between -1,541 million and -2,565 million. A significant contraction occurred in 2020, representing the period's lowest point, followed by a consistent recovery trend in 2021 and 2022 as the deficit narrowed.
- Invested Capital Trends
- Invested capital demonstrated a steady upward trajectory, growing from 34,219 million in 2018 to 38,278 million by 2022. This continuous expansion of the capital base occurred despite the lack of positive economic profit, suggesting ongoing capital deployment into the business.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrored the trend of economic profit, remaining negative throughout the analysis period. The ratio reached its most severe deficit in 2020 at -6.82%, before improving to -4.24% by 2022. This movement indicates a gradual narrowing of the gap between the company's actual return on capital and its cost of capital, although the threshold for value creation was not achieved.
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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 | (1,624) | (1,831) | (2,565) | (1,541) | (1,656) | |
| Revenue | 14,853) | 12,522) | 10,583) | 11,937) | 12,250) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -10.93% | -14.62% | -24.24% | -12.91% | -13.51% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -4.36% | -2.74% | — | — | — | |
| Uber Technologies Inc. | -37.73% | -20.97% | — | — | — | |
| Union Pacific Corp. | -3.46% | -6.15% | — | — | — | |
| United Airlines Holdings Inc. | -3.02% | -21.56% | — | — | — | |
| United Parcel Service Inc. | 5.24% | 8.02% | — | — | — | |
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 × -1,624 ÷ 14,853 = -10.93%
3 Click competitor name to see calculations.
Between 2018 and 2022, the organization consistently reported negative economic profit, indicating that the generated returns failed to cover the cost of capital employed during this period. While revenue experienced significant volatility, there was a observable trend of recovery in both absolute economic profit and the profit margin starting after 2020.
- Economic Profit Trends
- Economic profit remained negative throughout the five-year period. The deficit widened significantly in 2020, reaching a peak loss of -2,565 million US$. Following this low point, the economic profit improved sequentially in 2021 and 2022, closing the period at -1,624 million US$.
- Revenue Performance
- Revenue exhibited a U-shaped trajectory. A decline was observed from 2018 to 2020, with values dropping from 12,250 million US$ to 10,583 million US$. This was followed by a period of robust growth, with revenue increasing to 12,522 million US$ in 2021 and reaching a period high of 14,853 million US$ by December 31, 2022.
- Economic Profit Margin Analysis
- The economic profit margin fluctuated in alignment with revenue and absolute economic profit. The margin deteriorated sharply in 2020, hitting a minimum of -24.24%. From 2021 onward, a recovery phase is evident, as the margin improved to -14.62% and further to -10.93% in 2022. This final figure represents the most efficient utilization of capital relative to revenue within the analyzed timeframe, although the margin remained negative.
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