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.
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CSX Corp. pages available for free this week:
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
CSX Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial analysis reveals a consistent failure to generate positive economic profit over the five-year period ending December 31, 2022. Despite growth in operating profitability, the returns generated were insufficient to cover the cost of the capital employed, resulting in a sustained destruction of economic value.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trajectory is observed in NOPAT, which grew from 4,106 million US dollars in 2018 to 4,863 million US dollars in 2022. A notable contraction occurred in 2020, where profit fell to 3,545 million US dollars, before rebounding strongly in 2021 and 2022.
- Invested Capital and Cost of Capital
- Invested capital exhibited a steady increase, rising from 34,219 million US dollars in 2018 to 38,278 million US dollars by 2022. Concurrently, the cost of capital remained relatively stable, fluctuating within a narrow range between 16.32% and 17.04%. The combined effect of a growing capital base and a stable cost of capital increased the total capital charge required to achieve a positive economic profit.
- Economic Profit Trends
- Economic profit remained negative throughout the entire period, indicating that the company did not meet its required rate of return. The deficit peaked in 2020 at -2,597 million US dollars, coinciding with the lowest NOPAT recorded in the period. However, a recovery trend is evident from 2021 onward, with the economic loss narrowing to -1,658 million US dollars by 2022. This improvement suggests an increase in capital efficiency, although the operation remains economically value-destructive relative to the cost of capital.
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
= × =
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data reveals several key trends concerning profitability over the analyzed five-year period. Net earnings exhibited an initial slight increase from 2018 to 2019, growing marginally from 3,309 million USD to 3,331 million USD. This was followed by a noticeable decline in 2020 down to 2,765 million USD, indicating a downturn in earnings performance during that year. Subsequently, net earnings demonstrated a robust recovery, increasing significantly to 3,781 million USD in 2021 and further to 4,166 million USD in 2022, surpassing earlier results. This indicates a strong rebound and an overall positive trajectory post-2020.
Net operating profit after taxes (NOPAT) exhibits a pattern comparable to net earnings, although at consistently higher absolute values. From 2018 to 2019, NOPAT increased slightly from 4,106 million USD to 4,174 million USD, similar to the initial net earnings rise. In 2020, NOPAT declined noticeably to 3,545 million USD, coinciding with the drop observed in net earnings. Afterwards, there was a marked recovery in 2021, with NOPAT rising to 4,534 million USD and continuing upward to 4,863 million USD in 2022, reflecting improvement in operational profitability.
- Net Earnings Trends
- - Slight growth from 2018 to 2019
- - Decline in 2020, possibly reflecting adverse conditions
- - Strong recovery and growth in 2021 and 2022, reaching record highs in the period
- Net Operating Profit After Taxes (NOPAT) Trends
- - Positive growth early in the period (2018-2019)
- - Decrease in 2020 aligned with net earnings downturn
- - Significant rebound in 2021 and continued growth in 2022, indicating operational efficiency improvements
- Overall Insight
- The data suggests resilience in profitability following a challenging 2020, with both net earnings and NOPAT showing strong recovery and growth thereafter. Operational profits consistently exceeded net earnings, implying favorable non-operating factors or financial management contributing positively to net results.
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).
The financial data reflects the progression of income tax expense and cash operating taxes from 2018 to 2022, measured in millions of US dollars.
- Income Tax Expense
- This item shows a fluctuating but generally increasing trend across the five-year period. The expense declined slightly from 995 million in 2018 to 985 million in 2019, followed by a more noticeable decrease to 862 million in 2020. However, from 2020 onward, there was a significant rise to 1,170 million in 2021 and a further increase to 1,248 million in 2022, surpassing earlier years’ figures.
- Cash Operating Taxes
- Cash operating taxes exhibit a similar pattern to income tax expense. Starting at 854 million in 2018, the value increased marginally to 862 million in 2019, then decreased moderately to 842 million in 2020. Subsequently, there was a considerable rise to 1,159 million in 2021 and an additional increase to 1,284 million in 2022. The growth in 2021 and 2022 was strong enough to exceed the levels observed prior to 2020.
Overall, both income tax expense and cash operating taxes suffered declines in 2020, possibly reflecting economic conditions or operational factors impacting taxable income or tax payments during that year. The subsequent two years show recovery and robust increases, indicating higher taxable profits or changes in tax rates or policies. Notably, cash operating taxes slightly outpaced income tax expense in the last two years, which could suggest timing differences or changes in tax payment structures.
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.
- Total reported debt & leases
- The total reported debt and leases demonstrated an overall increasing trend across the observed periods. Starting at $15,060 million at the end of 2018, the figure rose steadily to $18,604 million by the end of 2022. There was a noticeable increment from 2019 to 2020, followed by a slight decline in 2021, and then an uptick again in 2022 reaching the highest value in the series.
- Shareholders’ equity, attributable to CSX
- Shareholders’ equity showed fluctuations during the five-year period. Beginning at $12,563 million in 2018, it decreased to $11,848 million in 2019. Subsequently, the equity improved, peaking at $13,490 million in 2021, before declining again to $12,615 million in 2022. This pattern suggests variable equity performance with no consistent growth trajectory.
- Invested capital
- Invested capital displayed a consistent growth pattern over the period examined. The value increased incrementally from $34,219 million in 2018 to $38,278 million in 2022. The growth was steady with modest year-to-year increases, indicating a gradual expansion of the capital base over time.
Cost of Capital
CSX Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Airlines Holdings Inc. | ||||||
| United Parcel Service Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The financial performance regarding economic value generation reflects a consistent inability to exceed the cost of capital throughout the five-year period from 2018 to 2022. Economic profit remained negative across all observed years, indicating that the returns generated on invested capital were insufficient to cover the required rate of return, thereby resulting in the destruction of economic value.
- Economic Spread Ratio Trends
- The economic spread ratio exhibited notable volatility, reaching its lowest point in 2020 at -6.90%. This decline coincided with the period of greatest economic loss. Following 2020, a recovery trend emerged, with the ratio improving to -4.95% in 2021 and further strengthening to -4.33% by December 31, 2022. Despite this upward trajectory, the ratio remained negative, signifying a persistent gap between the actual return on capital and the cost of capital.
- Invested Capital Growth
- Invested capital demonstrated a steady upward trajectory, increasing from 34,219 million USD in 2018 to 38,278 million USD in 2022. A significant capital expansion occurred between 2019 and 2020, with an increase of approximately 2,835 million USD. This expansion of the capital base did not yield positive economic results in the short term, as the negative spread widened during that same interval.
- Economic Profit Analysis
- Economic profit movements closely mirrored the economic spread ratio. Following a marginal improvement in 2019, economic profit declined sharply to -2,597 million USD in 2020. The subsequent two years showed a consistent recovery, with the loss narrowing to -1,864 million USD in 2021 and -1,658 million USD in 2022. This suggests a trend of stabilization and a gradual reduction in value destruction toward the end of the analyzed period.
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 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Airlines Holdings Inc. | ||||||
| United Parcel Service Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a persistent negative economic profit, indicating that the entity consistently failed to generate returns exceeding its cost of capital. Despite this, a trajectory of recovery is observable following a significant trough in 2020.
- Economic Profit Trends
- Economic profit remained negative throughout the period, starting at -1,685 million USD in 2018. A substantial decline occurred in 2020, where the figure reached a period low of -2,597 million USD. This was followed by a two-year recovery phase, with losses narrowing to -1,864 million USD in 2021 and further improving to -1,658 million USD by the end of 2022.
- Revenue Correlation
- Revenue patterns closely mirrored the fluctuations in economic profit. A contraction is noted from 2018 (12,250 million USD) through 2020 (10,583 million USD). This downturn was followed by a strong growth phase, with revenue expanding to 12,522 million USD in 2021 and peaking at 14,853 million USD in 2022.
- Economic Profit Margin Analysis
- The economic profit margin exhibited significant volatility, reaching its most distressed level of -24.54% in 2020, which corresponds with the simultaneous dip in both revenue and absolute economic profit. Since 2020, a consistent upward trend in the margin has been observed, improving to -14.89% in 2021 and reaching its highest point of -11.16% in 2022, suggesting a gradual improvement in the efficiency of capital utilization relative to revenue generation.