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
Honeywell International Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 5,535 – 13.98% × 61,387 = -3,046
An analysis of the economic profit from 2021 through 2025 reveals a consistent trend of value destruction, as economic profit remained negative throughout the entire period. The magnitude of this deficit expanded significantly over time, moving from -979 million US dollars in 2021 to -3,046 million US dollars by the end of 2025. This indicates that the returns generated by the operating assets were insufficient to cover the company's cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited relative stagnation with minor fluctuations. After a decrease to 5,460 million US dollars in 2022, the figure recovered to approximately 5,978 million US dollars by 2024, before declining again to 5,535 million US dollars in 2025. The lack of substantial growth in operating profit suggests a ceiling in operational earnings during this five-year window.
- Invested Capital Trends
- Invested capital remained stable between 2021 and 2023, hovering around 47,000 to 48,000 million US dollars. However, a substantial increase occurred in 2024, with invested capital rising to 60,349 million US dollars, and further increasing to 61,387 million US dollars in 2025. This sharp increase in the capital base without a corresponding rise in NOPAT contributed heavily to the deterioration of economic profit.
- Cost of Capital and Economic Value Added
- The cost of capital remained relatively stable, fluctuating between 13.90% and 14.65%. Despite a slight decrease in the cost of capital toward the end of the period, the economic profit worsened. The widening gap between NOPAT and the capital charge is most evident in 2024 and 2025, where the expanded invested capital base significantly increased the threshold of profit required to achieve a positive economic value added.
The overall financial trajectory indicates that the increase in invested capital since 2024 has not yielded proportional increases in operating profit. Consequently, the negative economic profit deepened, reflecting a decrease in the efficiency of capital deployment and an increase in the amount of value eroded for shareholders.
AI Ask an analyst for more
Net Operating Profit after Taxes (NOPAT)
Honeywell International Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in customer advances and deferred income.
4 Addition of increase (decrease) in obligations for product warranties and product performance guarantees.
5 Addition of increase (decrease) in repositioning reserves.
6 Addition of increase (decrease) in equity equivalents to net income attributable to Honeywell.
7 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 983 × 4.30% = 42
8 2025 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= 1,386 × 21.00% = 291
9 Addition of after taxes interest expense to net income attributable to Honeywell.
10 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 369 × 21.00% = 77
11 Elimination of after taxes investment income.
12 Elimination of discontinued operations.
Net income attributable to Honeywell and Net Operating Profit After Taxes (NOPAT) exhibited varied performance between 2021 and 2025. NOPAT demonstrated relative stability compared to net income, with fluctuations occurring within a defined range. A review of the figures reveals specific trends worthy of note.
- NOPAT Trend
- NOPAT began at US$5,961 million in 2021, decreased to US$5,460 million in 2022, and then recovered to US$5,956 million in 2023. This was followed by a slight increase to US$5,978 million in 2024 before declining to US$5,535 million in 2025. The period between 2022 and 2023 shows the most significant positive change, while the decrease from 2024 to 2025 represents the largest single-year decline within the observed timeframe.
- Net Income Trend
- Net income attributable to Honeywell started at US$5,542 million in 2021, decreased to US$4,966 million in 2022, increased substantially to US$5,658 million in 2023, and continued to rise to US$5,705 million in 2024. However, it experienced a notable decrease to US$4,729 million in 2025. The volatility in net income is more pronounced than that observed in NOPAT.
- Relationship between NOPAT and Net Income
- In 2021, NOPAT exceeded net income by US$419 million. This difference narrowed in 2022 to US$506 million, with NOPAT still exceeding net income. The gap widened again in 2023 to US$692 million, and remained substantial in 2024 at US$727 million. However, in 2025, NOPAT exceeded net income by US$806 million, indicating a larger divergence than in previous years. This suggests that factors beyond core operating profitability are increasingly influencing reported net income.
The observed trends suggest that while core operating profitability, as measured by NOPAT, has remained relatively stable, net income is subject to greater fluctuations. The increasing difference between NOPAT and net income in the later years warrants further investigation to identify the contributing factors, such as changes in non-operating items or tax rates.
AI Ask an analyst for more
Cash Operating Taxes
Honeywell International Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The reported tax expense and cash operating taxes exhibit distinct patterns over the five-year period. While both figures generally fluctuate, a notable divergence emerges, particularly in the later years. Tax expense demonstrates a decreasing trend from 2021 to 2025, while cash operating taxes show more variability.
- Tax Expense Trend
- Tax expense decreased from US$1,625 million in 2021 to US$1,008 million in 2025. A slight increase was observed between 2021 and 2022, followed by relative stability between 2022 and 2024 before a more substantial decline in 2025. This suggests potential changes in the company’s effective tax rate or taxable income.
- Cash Operating Taxes Trend
- Cash operating taxes increased from US$1,503 million in 2021 to US$1,654 million in 2022, representing a notable increase. This was followed by a decrease to US$1,434 million in 2023, then a significant rise to US$1,847 million in 2024. Finally, cash operating taxes decreased to US$1,204 million in 2025. The volatility in cash operating taxes suggests potential timing differences between reported tax expense and actual cash outflows for taxes.
- Relationship Between Tax Expense and Cash Operating Taxes
- In 2021 and 2022, cash operating taxes were relatively close to the reported tax expense. However, from 2023 onwards, a growing difference is apparent. In 2024, cash operating taxes exceeded tax expense by a considerable margin (US$374 million), while in 2025, tax expense exceeded cash operating taxes by US$204 million. This discrepancy could be attributed to deferred tax assets or liabilities, tax credits, or changes in tax laws impacting the timing of cash payments.
The observed trends indicate a potential decoupling between accounting-based tax expense and the actual cash taxes paid by the company. Further investigation into the underlying causes of these differences is warranted to fully understand the implications for economic value added (EVA) calculations and overall financial performance.
AI Ask an analyst for more
Invested Capital
Honeywell International Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
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 customer advances and deferred income.
5 Addition of obligations for product warranties and product performance guarantees.
6 Addition of repositioning reserves.
7 Addition of equity equivalents to total Honeywell shareowners’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
10 Subtraction of available for sale investments.
Analysis of the presented financial information reveals trends in the company’s capital structure over the five-year period. Invested capital demonstrates a generally increasing trajectory, while both total reported debt & leases and total shareowners’ equity exhibit more fluctuating patterns.
- Invested Capital
- Invested capital remained relatively stable between 2021 and 2023, fluctuating around the US$48 billion mark. A significant increase is observed in 2024, reaching US$60.349 billion, and continues to rise in 2025 to US$61.387 billion. This suggests an expansion of the company’s asset base funded by both debt and equity.
- Total Reported Debt & Leases
- Total reported debt & leases decreased slightly from US$20.631 billion in 2021 to US$20.537 billion in 2022. It then increased to US$21.536 billion in 2023 before experiencing a substantial rise to US$32.225 billion in 2024. This upward trend continues into 2025, reaching US$35.563 billion. The increases in 2024 and 2025 indicate a greater reliance on debt financing.
- Total Honeywell Shareowners’ Equity
- Total shareowners’ equity decreased from US$18.569 billion in 2021 to US$16.697 billion in 2022 and further declined to US$15.856 billion in 2023. A partial recovery is seen in 2024, with equity increasing to US$18.619 billion, but it then falls again in 2025 to US$13.904 billion. This suggests potential share repurchases, dividend payouts, or retained earnings impacts contributing to the fluctuations.
The combined effect of these trends is a growing reliance on debt to fund the increasing invested capital, particularly evident in the later years of the period. While invested capital has increased consistently since 2024, the shareowners’ equity has shown volatility, with a notable decrease in 2025. This shift in the capital structure warrants further investigation to assess its implications for the company’s financial risk and future performance.
AI Ask an analyst for more
Cost of Capital
Honeywell International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 154,247) | 154,247) | ÷ | 189,267) | = | 0.81 | 0.81 | × | 16.47% | = | 13.42% | ||
| Debt3 | 34,037) | 34,037) | ÷ | 189,267) | = | 0.18 | 0.18 | × | 3.81% × (1 – 21.00%) | = | 0.54% | ||
| Operating lease liability4 | 983) | 983) | ÷ | 189,267) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 189,267) | 1.00 | 13.98% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 131,771) | 131,771) | ÷ | 162,673) | = | 0.81 | 0.81 | × | 16.47% | = | 13.34% | ||
| Debt3 | 29,776) | 29,776) | ÷ | 162,673) | = | 0.18 | 0.18 | × | 3.75% × (1 – 21.00%) | = | 0.54% | ||
| Operating lease liability4 | 1,126) | 1,126) | ÷ | 162,673) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 162,673) | 1.00 | 13.90% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 128,591) | 128,591) | ÷ | 149,475) | = | 0.86 | 0.86 | × | 16.47% | = | 14.17% | ||
| Debt3 | 19,791) | 19,791) | ÷ | 149,475) | = | 0.13 | 0.13 | × | 3.11% × (1 – 21.00%) | = | 0.33% | ||
| Operating lease liability4 | 1,093) | 1,093) | ÷ | 149,475) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 149,475) | 1.00 | 14.51% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 133,942) | 133,942) | ÷ | 153,482) | = | 0.87 | 0.87 | × | 16.47% | = | 14.37% | ||
| Debt3 | 18,573) | 18,573) | ÷ | 153,482) | = | 0.12 | 0.12 | × | 2.84% × (1 – 21.00%) | = | 0.27% | ||
| Operating lease liability4 | 967) | 967) | ÷ | 153,482) | = | 0.01 | 0.01 | × | 2.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 153,482) | 1.00 | 14.65% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 128,241) | 128,241) | ÷ | 149,837) | = | 0.86 | 0.86 | × | 16.47% | = | 14.09% | ||
| Debt3 | 20,564) | 20,564) | ÷ | 149,837) | = | 0.14 | 0.14 | × | 2.30% × (1 – 21.00%) | = | 0.25% | ||
| Operating lease liability4 | 1,032) | 1,032) | ÷ | 149,837) | = | 0.01 | 0.01 | × | 2.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 149,837) | 1.00 | 14.35% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Honeywell International Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (3,046) | (2,410) | (1,030) | (1,475) | (979) | |
| Invested capital2 | 61,387) | 60,349) | 48,147) | 47,332) | 48,349) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.96% | -3.99% | -2.14% | -3.12% | -2.03% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -5.93% | -35.22% | -15.16% | -20.54% | -19.14% | |
| Caterpillar Inc. | -7.23% | -2.63% | -2.69% | -6.60% | -5.99% | |
| Eaton Corp. plc | -5.23% | -6.40% | -7.98% | -9.88% | -9.48% | |
| GE Aerospace | 3.00% | -0.88% | 0.96% | -13.94% | -18.85% | |
| Lockheed Martin Corp. | 13.06% | 12.04% | 18.49% | 14.52% | 15.50% | |
| RTX Corp. | -0.63% | -2.76% | -4.52% | -4.55% | -4.03% | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,046 ÷ 61,387 = -4.96%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a persistent inability to generate positive economic value. The economic spread ratio remained negative throughout the entire period, indicating that the returns on invested capital consistently failed to exceed the company's cost of capital.
- Economic Profit Trends
- Economic profit remained negative for all five years, reflecting a continuous destruction of shareholder value. While a brief period of relative stabilization occurred in 2023, where losses narrowed to -1,030 million, this was followed by a significant acceleration in losses. By 2025, the economic profit reached its lowest point at -3,046 million, representing a substantial increase in value erosion compared to the -979 million recorded in 2021.
- Invested Capital Dynamics
- The capital base remained relatively stable between 2021 and 2023, fluctuating around the 48 billion range. However, a sharp increase in invested capital was observed in 2024, rising to 60,349 million, and further increasing to 61,387 million in 2025. This expansion of the asset base did not correlate with an improvement in economic performance.
- Economic Spread Ratio Analysis
- The economic spread ratio exhibits a clear downward trajectory, moving from -2.03% in 2021 to -4.96% in 2025. The ratio experienced a temporary improvement in 2023 to -2.14%, but subsequently deteriorated sharply. The widening negative spread in 2024 and 2025 suggests that the additional capital deployed during this period failed to generate sufficient returns to cover the cost of that capital, thereby compounding the inefficiency of the invested assets.
AI Ask an analyst for more
Economic Profit Margin
Honeywell International Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (3,046) | (2,410) | (1,030) | (1,475) | (979) | |
| Net sales | 37,442) | 38,498) | 36,662) | 35,466) | 34,392) | |
| Add: Increase (decrease) in customer advances and deferred income | 376) | 26) | (219) | 402) | 199) | |
| Adjusted net sales | 37,818) | 38,524) | 36,443) | 35,868) | 34,591) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -8.06% | -6.26% | -2.83% | -4.11% | -2.83% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -3.55% | -26.62% | -8.75% | -15.69% | -15.20% | |
| Caterpillar Inc. | -7.31% | -2.47% | -2.34% | -6.39% | -6.90% | |
| Eaton Corp. plc | -6.58% | -8.22% | -10.81% | -14.65% | -14.23% | |
| GE Aerospace | 2.74% | -0.94% | 0.75% | -12.64% | -19.03% | |
| Lockheed Martin Corp. | 5.28% | 4.88% | 7.50% | 5.85% | 6.62% | |
| RTX Corp. | -0.77% | -3.68% | -7.12% | -7.46% | -6.99% | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -3,046 ÷ 37,818 = -8.06%
3 Click competitor name to see calculations.
Analysis of the economic value added reveals a persistent inability to generate positive economic profit between 2021 and 2025. Despite a general increase in adjusted net sales for the majority of the period, the company experienced a widening deficit in economic profit, indicating that returns failed to exceed the cost of capital throughout the observed timeframe.
- Economic Profit Trend
- Economic profit remained negative for the entire five-year duration. Following an increase in losses in 2022, a partial recovery was observed in 2023, as the deficit narrowed to US$ 1,030 million. However, this improvement was short-lived, as a significant deterioration occurred in 2024 and 2025, with economic losses expanding sharply to US$ 2,410 million and US$ 3,046 million, respectively.
- Adjusted Net Sales Performance
- Sales demonstrated a steady upward trajectory from 2021 through 2024, peaking at US$ 38,524 million. A slight contraction occurred in 2025, with sales retreating to US$ 37,818 million. The lack of correlation between sales growth and economic profit suggests that the increase in scale did not translate into value creation.
- Economic Profit Margin Analysis
- The economic profit margin remained consistently negative, signifying sustained shareholder value destruction. While the margin fluctuated between -2.83% and -4.11% from 2021 to 2023, it shifted to a steep downward trend in the latter two years. The margin declined to -6.26% in 2024 and reached a period low of -8.06% by 2025, reflecting a diminishing capacity to generate economic value relative to total revenue.
AI Ask an analyst for more