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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Economic Profit
Honeywell International Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The analysis of economic value creation reveals a persistent trend of value destruction, as economic profit remained negative throughout the entire period from 2021 to 2025. There is a notable acceleration in the erosion of economic value starting in 2024, indicating that the returns generated from operations are increasingly insufficient to cover the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability exhibited limited growth and significant volatility. NOPAT fluctuated from 5,961 million USD in 2021 to a low of 5,460 million USD in 2022, before recovering to a peak of 5,978 million USD in 2024 and declining again to 5,535 million USD in 2025. This stagnation in operating earnings suggests an inability to scale profitability in alignment with capital expansion.
- Invested Capital and Cost of Capital
- A significant shift in the capital structure occurred in 2024. Invested capital remained relatively stable between 47,332 million USD and 48,349 million USD from 2021 to 2023, but surged to 60,349 million USD in 2024 and reached 61,387 million USD by 2025. During this same period, the cost of capital remained relatively stable, fluctuating within a narrow band between 13.79% and 14.53%.
- Economic Profit Dynamics
- The widening gap between NOPAT and the capital charge led to a deterioration of economic profit. While the loss was -923 million USD in 2021, it expanded sharply to -2,343 million USD in 2024 and -2,978 million USD in 2025. This trajectory demonstrates that the substantial increase in invested capital observed in the later years failed to produce proportional increases in NOPAT, thereby intensifying the destruction of economic value.
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
= × =
8 2025 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 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
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$806 million, indicating a larger divergence than in previous years. This suggests that factors beyond core operating profitability are increasingly influencing reported net income.
The observed trends suggest that while core operating profitability, as measured by NOPAT, has remained relatively stable, net income is subject to greater fluctuations. The increasing difference between NOPAT and net income in the later years warrants further investigation to identify the contributing factors, such as changes in non-operating items or tax rates.
Cash Operating Taxes
Honeywell International Inc., cash operating taxes calculation
US$ 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$204 million. This discrepancy could be attributed to deferred tax assets or liabilities, tax credits, or changes in tax laws impacting the timing of cash payments.
The observed trends indicate a potential decoupling between accounting-based tax expense and the actual cash taxes paid by the company. Further investigation into the underlying causes of these differences is warranted to fully understand the implications for economic value added (EVA) calculations and overall financial performance.
Invested Capital
Honeywell International Inc., invested capital calculation (financing approach)
US$ 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$13.904 billion. This suggests potential share repurchases, dividend payouts, or retained earnings impacts contributing to the fluctuations.
The combined effect of these trends is a growing reliance on debt to fund the increasing invested capital, particularly evident in the later years of the period. While invested capital has increased consistently since 2024, the shareowners’ equity has shown volatility, with a notable decrease in 2025. This shift in the capital structure warrants further investigation to assess its implications for the company’s financial risk and future performance.
Cost of Capital
Honeywell International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| 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 »
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 | ||||||
| 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: 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 × ÷ =
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2021 through 2025 reveals a consistent failure to generate positive economic value. Throughout the observed period, economic profit remained negative, indicating that the returns generated were insufficient to cover the cost of the capital employed.
- Economic Profit Trends
- Economic profit exhibited a persistent negative trajectory, starting at -923 million US$ in 2021 and deteriorating to -2,978 million US$ by 2025. While a marginal recovery occurred in 2023, where losses narrowed to -973 million US$, this was followed by a sharp acceleration in value destruction during 2024 and 2025.
- Invested Capital Growth
- Invested capital remained relatively stable between 2021 and 2023, fluctuating around 48 billion US$. However, a significant increase in capital commitment is observed starting in 2024, with invested capital rising to 60,349 million US$ and reaching 61,387 million US$ in 2025. This expansion in the capital base occurred simultaneously with increasing economic losses.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative for the entire five-year duration, confirming that the return on invested capital stayed below the cost of capital. The ratio fluctuated between -1.91% in 2021 and -2.02% in 2023 before trending sharply downward to -3.88% in 2024 and -4.85% in 2025. This widening negative spread indicates a decline in capital efficiency and an increasing gap between the actual returns and the required rate of return.
The correlation between the substantial increase in invested capital after 2023 and the widening negative economic spread suggests that recent capital allocations have not yielded proportional returns, thereby intensifying the erosion of economic value.
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 | ||||||
| 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: 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 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a consistent inability to generate positive economic profit, indicating that returns on capital remained below the required cost of capital throughout the analyzed period. While adjusted net sales experienced a general increase until 2024, this growth did not correlate with value creation, as the economic profit margin deteriorated significantly in the final two years of the period.
- Economic Profit Trends
- Economic profit remained negative for five consecutive years, exhibiting a volatile downward trajectory. After an initial decline from -923 million in 2021 to -1,419 million in 2022, a moderate recovery was observed in 2023, where losses narrowed to -973 million. However, this recovery was short-lived, followed by a sharp expansion of losses to -2,343 million in 2024 and a peak deficit of -2,978 million by 2025.
- Adjusted Net Sales Performance
- Adjusted net sales demonstrated a steady upward trend for the majority of the period, growing from 34,591 million in 2021 to a peak of 38,524 million in 2024. A slight contraction occurred in 2025, with sales retreating to 37,818 million. The divergence between rising sales and falling economic profit suggests that the operational expansion did not yield sufficient returns to cover the associated capital charges.
- Economic Profit Margin Analysis
- The economic profit margin highlights an accelerating erosion of value relative to revenue. The margin fluctuated between -2.67% and -3.95% from 2021 to 2023, suggesting a period of relative stability in value destruction. This trend shifted abruptly in 2024, with the margin falling to -6.08%, and further declining to -7.87% in 2025. The widening negative margin indicates a substantial decrease in the efficiency of capital deployment relative to the company's scale of operations.