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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Honeywell International Inc. pages available for free this week:
- Analysis of Liquidity Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Current Ratio since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Economic Profit
Honeywell International Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values exhibit fluctuations over the observed periods. Starting at 5,376 million US dollars in 2020, there is an increase to 5,961 million in 2021, followed by a notable decline to 5,460 million in 2022. Subsequently, NOPAT rises again to 5,956 million in 2023 and slightly increases further to 5,978 million in 2024. Overall, NOPAT shows a recovery after a mid-period dip with values in 2024 slightly exceeding those in 2021.
- Cost of Capital
- The cost of capital demonstrates a generally stable but slightly declining trend towards the end of the period. Beginning at 13.31% in 2020, it marginally increases to reach a peak of 13.64% in 2022. After this peak, it moderately decreases to 13.51% in 2023 and further to 12.96% in 2024, indicating a reduction in the cost of capital during the latter years.
- Invested Capital
- Invested capital decreases gradually from 49,130 million US dollars in 2020 to 47,332 million in 2022, reflecting a contraction in capital investment over the initial three years. This trend reverses in 2023, where invested capital increases to 48,147 million, followed by a substantial jump to 60,349 million in 2024. The sharp increase in 2024 may indicate significant new investments or capital restructuring.
- Economic Profit
- Economic profit remains negative throughout the periods, indicating that returns did not exceed the cost of capital at any point. The deficit lessens from -1,165 million in 2020 to -501 million in 2021, suggesting improved profitability with respect to capital costs. However, this improvement is short-lived, as economic profit declines again to -997 million in 2022, slightly improves to -551 million in 2023, but deteriorates sharply to -1,845 million in 2024. The worsening economic profit in 2024, despite an increase in NOPAT, is likely influenced by the sharp rise in invested capital and only a moderate reduction in the cost of capital.
Net Operating Profit after Taxes (NOPAT)
Honeywell International Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
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 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2024 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income attributable to Honeywell.
10 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
The financial data reveals the following trends for the analyzed period:
- Net Income Attributable
- The net income attributable to the entity showed a positive growth trend overall. Starting from approximately $4,779 million at the end of 2020, it increased to $5,542 million in 2021, reflecting a strong upward movement. However, there was a decline in 2022 to about $4,966 million, indicating a possible short-term setback or increased costs impacting profitability. The amount rebounded in 2023, reaching $5,658 million, and continued a slight increase into 2024, ending at $5,705 million. This pattern suggests resilience and recovery after the dip in 2022, with sustained profitability gains in the subsequent years.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT figures display a somewhat similar pattern to net income but overall maintain higher absolute values. The measure rose from $5,376 million in 2020 to $5,961 million in 2021, showing improvement in operations after tax considerations. A decrease occurred in 2022 to $5,460 million, mirroring the net income dip but with a less pronounced decline percentage-wise. Subsequently, NOPAT increased again to $5,956 million in 2023 and remained relatively stable into 2024 at $5,978 million. This trend indicates operational efficiency and effective tax management despite fluctuations, contributing to a steady NOPAT performance post-2022.
Overall, the data points to a company experiencing growth after 2020, facing a temporary decrease in 2022 in both net income and NOPAT, and then recovering with stable or increasing profitability through 2023 and 2024. The recovery phase suggests effective management responses to prior challenges, with consistent operational profit maintenance after tax effects considered.
Cash Operating Taxes
Honeywell International Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
The analysis of the financial data reveals a fluctuating trend in tax-related expenses over the five-year period from 2020 to 2024.
- Tax Expense
- This item shows variability, with an initial increase from 1147 million US dollars in 2020 to a peak of 1625 million in 2021. Afterward, there was a decline to 1412 million in 2022, followed by a modest increase to 1487 million in 2023 and a slight decrease to 1473 million in 2024. Overall, the tax expense exhibits moderate fluctuations without a clear linear trend, suggesting changes in taxable income, tax rates, or tax planning strategies may have impacted this item.
- Cash Operating Taxes
- Cash operating taxes display a somewhat different pattern, with an increase from 1380 million in 2020 to a higher level of 1503 million in 2021. A further rise is noted in 2022 to 1654 million, followed by a decline to 1434 million in 2023. However, 2024 shows a significant increase to 1847 million, which is the highest value in the period analyzed. This suggests increased cash tax payments in the latest year, potentially due to changes in taxable income recognition, tax prepayments, or adjustments of prior tax obligations.
Comparing the two metrics, cash operating taxes consistently remain above the reported tax expense for most years, with the gap widening notably in 2024. This divergence may indicate timing differences between tax expense recognition in financial statements and actual cash tax outflows. The variability and the recent increase in cash operating taxes could signal changes in tax policy, effective tax rates, or operational results impacting tax liabilities.
Invested Capital
Honeywell International Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
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.
The annual financial data reflects several significant trends concerning the company's debt levels, equity position, and overall invested capital.
- Total reported debt & leases
- There is a noticeable fluctuation in the total reported debt and leases over the five-year period. Starting from a relatively high level of 23,212 million USD at the end of 2020, the debt decreased to approximately 20,631 million USD in 2021 and remained fairly stable through 2022 at 20,537 million USD. In 2023, a slight increase to 21,536 million USD is observed. However, by the end of 2024, the debt surged markedly to 32,225 million USD, which represents a significant rise compared to previous years, indicating potential changes in financing strategy or increased borrowing.
- Total Honeywell shareowners’ equity
- The company's shareholders’ equity shows a more volatile but overall stable pattern. It initially increased from 17,549 million USD in 2020 to a peak of 18,569 million USD in 2021, followed by a decline to 16,697 million USD in 2022, and further down to a low of 15,856 million USD in 2023. By the end of 2024, equity recovered somewhat to 18,619 million USD, slightly surpassing the earlier peak. This fluctuation suggests periods of either retained earnings variation or equity adjustments, potentially influenced by market conditions and company performance.
- Invested capital
- The invested capital shows a gradual downward trend from 49,130 million USD in 2020 to a low of 47,332 million USD in 2022. It then moderately rebounds to 48,147 million USD in 2023 before exhibiting a substantial increase to 60,349 million USD in 2024. The sharp rise in invested capital in the final year correlates with the marked increase in debt, which may suggest the company has undertaken major investments financed predominantly through increased borrowing.
In summary, the data reveals that the company maintained relatively stable debt and equity figures between 2020 and 2023, with minor fluctuations. However, the year 2024 shows a pronounced increase in debt alongside a significant expansion in invested capital and a rebound in shareholder equity. These patterns may reflect strategic initiatives involving large-scale investments and changes in capital structure, indicating a more aggressive financial posture in the most recent year.
Cost of Capital
Honeywell International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Honeywell International Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed significant variability over the five-year period. It started at a substantial negative value of -1165 million US dollars in 2020, improved notably in 2021 to -501 million, indicating a reduction in economic losses. However, in 2022 it worsened again to -997 million, followed by an improvement in 2023 to -551 million. In 2024, the economic profit deteriorated sharply to -1845 million, representing the greatest negative economic profit in the period under review.
- Invested Capital
- The invested capital exhibited relative stability from 2020 through 2023, fluctuating marginally between approximately 47.3 billion to 49.1 billion US dollars. In 2024, a notable increase was observed, with invested capital rising significantly to 60.3 billion US dollars. This marked increase could reflect expanded investment activities or acquisitions during the year.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the period, indicating that returns on invested capital were consistently below the cost of capital. The ratio improved from -2.37% in 2020 to -1.04% in 2021, suggesting a marginally better economic performance. However, it deteriorated again in 2022 to -2.11%, slightly improved in 2023 to -1.14%, and then declined significantly to -3.06% in 2024, reflecting a worsening economic spread and potentially lower profitability relative to invested capital cost.
- Overall Trends and Insights
- The data indicates persistent economic losses over the five years, with fluctuations but an overall negative trend in economic profit and economic spread ratio. The marked increase in invested capital in 2024 contrasts with the sharp deterioration in economic profit and economic spread ratio the same year, suggesting that the increased investment did not translate into improved economic returns for that period. The recurring negative economic spread ratio underscores ongoing challenges with generating returns above the cost of capital.
Economic Profit Margin
Honeywell International Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in customer advances and deferred income | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted net sales
- The adjusted net sales demonstrate a steady upward trend over the five-year period, increasing from 33,125 million USD in 2020 to 38,524 million USD in 2024. This consistent growth reflects a positive development in revenue generation year over year, with an approximate total increase of 16.3% over the period analyzed.
- Economic profit
- Economic profit exhibits considerable fluctuations and remains negative throughout the period. The value started at -1,165 million USD in 2020, improved substantially to -501 million USD in 2021, then declined again to -997 million USD in 2022. It showed partial recovery in 2023 to -551 million USD but sharply deteriorated in 2024, reaching -1,845 million USD. These volatile changes indicate ongoing challenges in achieving true economic profitability despite sales growth.
- Economic profit margin
- The economic profit margin mirrors the trend of economic profit, consistently negative and fluctuating over time. Beginning at -3.52% in 2020, the margin improved to -1.45% in 2021, then eroded to -2.78% in 2022, followed by a slight recovery to -1.51% in 2023. However, 2024 shows a significant decline to -4.79%, the lowest point in the observed period. This suggests increasing inefficiencies or higher costs relative to sales, adversely affecting the profitability ratio.
- Summary
- While adjusted net sales have grown steadily, this growth has not translated into positive economic profit or margin. The company consistently experiences negative economic profits with considerable volatility, and the economic profit margin worsens significantly in the latest year. These patterns imply that despite increasing revenue, challenges in cost management, capital efficiency, or other expenses may have intensified, resulting in substantial economic losses. The deterioration in economic profitability in the most recent period warrants close attention to underlying causes affecting value creation.