CSX Corp. (NASDAQ:CSX)

Net Operating Profit After Taxes (NOPAT)

Over the five-year period from 2018 to 2022, NOPAT exhibited some fluctuations but generally followed an upward trend. Starting at 4,106 million US dollars in 2018, it saw a modest increase to 4,174 million in 2019, followed by a notable decline to 3,545 million in 2020. Subsequently, NOPAT rebounded significantly to 4,534 million in 2021 and further increased to 4,863 million in 2022, indicating a recovery and growth in operational profitability in the latter years.

Cost of Capital

The cost of capital showed a relatively stable pattern, ranging narrowly between 13.96% and 14.55% over the period. It decreased slightly from 14.48% in 2018 to 13.96% in 2020, then increased gradually to 14.52% in 2021 and marginally to 14.55% in 2022. This stability implies that the company faced consistent expectations regarding the required rate of return by investors and creditors with minor variations.

Invested Capital

Invested capital increased steadily throughout the period. Beginning at 34,219 million US dollars in 2018, it rose to 34,802 million in 2019 and continued to grow to 37,637 million in 2020. The invested capital remained nearly flat in 2021 at 37,644 million before increasing again to 38,278 million in 2022. This gradual increase suggests ongoing asset investments or capital deployments.

Economic Profit

Economic profit was negative in all reported years, indicating that the returns did not surpass the cost of capital during this period. The magnitude of the negative economic profit showed some variation, starting at -847 million US dollars in 2018 and improving slightly to -741 million in 2019. However, in 2020 there was a significant deterioration to -1,708 million, reflecting lower returns relative to the capital cost. Economic profit improved again in 2021 to -931 million and further to -707 million in 2022, indicating a trend toward reducing value erosion but still not achieving positive economic profit.

Summary

Overall, the company experienced growth in net operating profit and invested capital over the five years, alongside a stable cost of capital. Despite this, economic profit remained negative throughout, signaling a persistent challenge in generating returns above the cost of capital. The sharp dip in 2020 across key profitability indicators aligns with external factors likely impacting operations. Recovery in 2021 and 2022 shows improvements but suggests continued focus is needed on enhancing capital efficiency and profitability to achieve positive economic value creation.

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.

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.

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.

Economic Profit

The economic profit demonstrates a consistent negative trend over the analyzed period, indicating that the company has been generating economic losses each year. Starting at -847 million US dollars in 2018, the losses slightly reduced to -741 million in 2019 but sharply worsened to -1708 million in 2020. Following that peak loss, the economic profit improved in 2021 and 2022, reducing the losses to -931 million and -707 million, respectively. Despite this improvement in the last two years, the company still records substantial negative economic profit.

Invested Capital

The invested capital exhibits a steady increase over the five years. It grew from 34,219 million US dollars at the end of 2018 to 38,278 million by the end of 2022. The growth in invested capital from 2019 to 2020 was more pronounced compared to other years, with an increase of approximately 2,800 million US dollars. Growth stabilized afterward, showing marginal increases in the subsequent years.

Economic Spread Ratio

The economic spread ratio remains consistently negative throughout the period, which indicates that the return on invested capital is less than the cost of capital. The ratio begins at -2.48% in 2018 and improves marginally to -2.13% in 2019. However, it deteriorates significantly in 2020 to -4.54%, mirroring the spike in negative economic profit during the same year. The ratio recovers gradually in 2021 and 2022 to -2.47% and -1.85%, respectively, indicating a slight improvement in the economic returns relative to capital costs.

Overall Analysis

The company’s financial performance in terms of economic profit and economic spread ratio reveals persistent challenges in generating adequate returns above the cost of capital. Although there was a marked increase in invested capital over the period, this investment did not correspond with positive economic profits. The peak of economic losses and the lowest economic spread ratio in 2020 suggest a particularly difficult year, potentially due to external or internal factors that adversely affected profitability. The partial recovery in the final two years points to some improvement in financial efficiency, but the metrics remain well below breakeven, indicating ongoing economic inefficiency.

The financial data indicates several significant trends over the five-year period ending in 2022.

Revenue

The revenue displayed a fluctuating pattern with an overall upward trend. Starting at 12,250 million US dollars in 2018, it slightly decreased in 2019 and further declined in 2020 to 10,583 million US dollars. However, the revenue rebounded sharply in 2021 to 12,522 million US dollars and continued to increase impressively in 2022, reaching 14,853 million US dollars. This suggests a recovery and growth phase after the dip observed in 2020.

Economic Profit

The economic profit figures were negative across all years, indicating that the company incurred economic losses throughout this period. Starting at -847 million US dollars in 2018, the economic loss narrowed somewhat in 2019 to -741 million US dollars but then worsened substantially in 2020 to -1,708 million US dollars. The loss improved again during 2021 and 2022, reaching -931 million US dollars and -707 million US dollars, respectively. This pattern mirrors the fluctuations in revenue but reveals persistent challenges in generating positive economic profit.

Economic Profit Margin

The economic profit margin remained negative during the entire timeframe, consistent with the negative economic profit values. It improved from -6.92% in 2018 to -6.21% in 2019 but declined sharply to -16.14% in 2020, suggesting significantly reduced profitability relative to revenue during that year. Following this low, the margin improved noticeably in 2021 and 2022, reaching -7.44% and -4.76%, respectively, indicating better economic efficiency but still reflecting losses.

Overall, the data depicts a business experiencing volatility in revenue, with a pronounced downturn in 2020 likely correlated with external or operational challenges. Despite the negative economic profit and margins each year, the latter two years demonstrate a recovery trend with improving revenue and narrowing economic losses. The negative economic profit margins throughout the period highlight ongoing difficulties in achieving sustainable profitability.