Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

AT&T Inc. (NYSE:T)

Economic Value Added (EVA)

Advanced level

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

AT&T Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 24,495  27,894  18,425  20,093  21,337 
Cost of capital2 6.23% 6.04% 5.79% 6.22% 6.02%
Invested capital3 437,536  438,899  358,259  318,708  315,443 
 
Economic profit4 (2,765) 1,366  (2,335) 268  2,355 

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 24,4956.23% × 437,536 = -2,765

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. AT&T Inc.’s economic profit increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

AT&T Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income attributable to AT&T 13,903  19,370  29,450  12,976  13,345 
Deferred income tax expense (benefit)1 1,701  610  (15,940) 2,947  4,117 
Increase (decrease) in allowances for doubtful accounts2 328  244  (43) 250 
Increase (decrease) in equity equivalents3 2,029  854  (15,938) 2,904  4,367 
Interest expense 8,422  7,957  6,300  4,910  4,120 
Interest expense, operating lease liability4 1,061  1,014  949  1,024  955 
Adjusted interest expense 9,483  8,971  7,249  5,934  5,075 
Tax benefit of interest expense5 (1,991) (1,884) (2,537) (2,077) (1,776)
Adjusted interest expense, after taxes6 7,491  7,087  4,712  3,857  3,299 
(Gain) loss on marketable securities —  —  (302) (2) (24)
Investment income, before taxes —  —  (302) (2) (24)
Tax expense (benefit) of investment income7 —  —  106 
Investment income, after taxes8 —  —  (196) (1) (16)
Net income (loss) attributable to noncontrolling interest 1,072  583  397  357  342 
Net operating profit after taxes (NOPAT) 24,495  27,894  18,425  20,093  21,337 

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances for doubtful accounts.

3 Addition of increase (decrease) in equity equivalents to net income attributable to AT&T.

4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 25,255 × 4.20% = 1,061

5 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 9,483 × 21.00% = 1,991

6 Addition of after taxes interest expense to net income attributable to AT&T.

7 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

8 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. AT&T Inc.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Cash Operating Taxes

AT&T Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income tax expense (benefit) 3,493  4,920  (14,708) 6,479  7,005 
Less: Deferred income tax expense (benefit) 1,701  610  (15,940) 2,947  4,117 
Add: Tax savings from interest expense 1,991  1,884  2,537  2,077  1,776 
Less: Tax imposed on investment income —  —  106 
Cash operating taxes 3,783  6,194  3,664  5,608  4,656 

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. AT&T Inc.’s cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Invested Capital

AT&T Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Debt maturing within one year 11,838  10,255  38,374  9,832  7,636 
Long-term debt, excluding maturing within one year 151,309  166,250  125,972  113,681  118,515 
Operating lease liability1 25,255  23,039  21,576  24,373  23,869 
Total reported debt & leases 188,402  199,544  185,922  147,886  150,020 
Stockholders’ equity attributable to AT&T 184,221  184,089  140,861  123,135  122,671 
Net deferred tax (assets) liabilities2 59,334  57,748  43,176  58,717  55,088 
Allowances for doubtful accounts3 1,235  907  663  661  704 
Equity equivalents4 60,569  58,655  43,839  59,378  55,792 
Accumulated other comprehensive (income) loss, net of tax5 (5,470) (4,249) (7,017) (4,961) (5,334)
Noncontrolling interest 17,713  9,795  1,146  975  969 
Adjusted stockholders’ equity attributable to AT&T 257,033  248,290  178,829  178,527  174,098 
Under construction6 (4,176) (5,526) (4,045) (5,118) (5,971)
Investment securities7 (3,723) (3,409) (2,447) (2,587) (2,704)
Invested capital 437,536  438,899  358,259  318,708  315,443 

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

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 stockholders’ equity attributable to AT&T.

5 Removal of accumulated other comprehensive income.

6 Subtraction of under construction.

7 Subtraction of investment securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. AT&T Inc.’s invested capital increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Cost of Capital

AT&T Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 276,945  276,945  ÷ 487,624  = 0.57 0.57 × 8.33% = 4.73%
Preferred stock, $1 par value, 5% cumulative 1,262  1,262  ÷ 487,624  = 0.00 0.00 × 5.00% = 0.01%
Debt3 184,162  184,162  ÷ 487,624  = 0.38 0.38 × 4.40% × (1 – 21.00%) = 1.31%
Operating lease liability4 25,255  25,255  ÷ 487,624  = 0.05 0.05 × 4.20% × (1 – 21.00%) = 0.17%
Total: 487,624  1.00 6.23%

Based on: 10-K (filing date: 2020-02-20).

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 224,730  224,730  ÷ 425,032  = 0.53 0.53 × 8.33% = 4.41%
Preferred stock, $1 par value, 5% cumulative —  —  ÷ 425,032  = 0.00 0.00 × 0.00% = 0.00%
Debt3 177,263  177,263  ÷ 425,032  = 0.42 0.42 × 4.40% × (1 – 21.00%) = 1.45%
Operating lease liability4 23,039  23,039  ÷ 425,032  = 0.05 0.05 × 4.40% × (1 – 21.00%) = 0.19%
Total: 425,032  1.00 6.04%

Based on: 10-K (filing date: 2019-02-20).

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 225,824  225,824  ÷ 421,158  = 0.54 0.54 × 8.33% = 4.47%
Preferred stock, $1 par value, 5% cumulative —  —  ÷ 421,158  = 0.00 0.00 × 0.00% = 0.00%
Debt3 173,758  173,758  ÷ 421,158  = 0.41 0.41 × 4.40% × (1 – 35.00%) = 1.18%
Operating lease liability4 21,576  21,576  ÷ 421,158  = 0.05 0.05 × 4.40% × (1 – 35.00%) = 0.15%
Total: 421,158  1.00 5.79%

Based on: 10-K (filing date: 2018-02-20).

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 254,752  254,752  ÷ 408,984  = 0.62 0.62 × 8.33% = 5.19%
Preferred stock, $1 par value, 5% cumulative —  —  ÷ 408,984  = 0.00 0.00 × 0.00% = 0.00%
Debt3 129,858  129,858  ÷ 408,984  = 0.32 0.32 × 4.20% × (1 – 35.00%) = 0.87%
Operating lease liability4 24,373  24,373  ÷ 408,984  = 0.06 0.06 × 4.20% × (1 – 35.00%) = 0.16%
Total: 408,984  1.00 6.22%

Based on: 10-K (filing date: 2017-02-17).

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 227,533  227,533  ÷ 381,699  = 0.60 0.60 × 8.33% = 4.97%
Preferred stock, $1 par value, 5% cumulative —  —  ÷ 381,699  = 0.00 0.00 × 0.00% = 0.00%
Debt3 130,297  130,297  ÷ 381,699  = 0.34 0.34 × 4.00% × (1 – 35.00%) = 0.89%
Operating lease liability4 23,869  23,869  ÷ 381,699  = 0.06 0.06 × 4.00% × (1 – 35.00%) = 0.16%
Total: 381,699  1.00 6.02%

Based on: 10-K (filing date: 2016-02-18).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

AT&T Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (2,765) 1,366  (2,335) 268  2,355 
Invested capital2 437,536  438,899  358,259  318,708  315,443 
Performance Ratio
Economic spread ratio3 -0.63% 0.31% -0.65% 0.08% 0.75%
Benchmarks
Economic Spread Ratio, Competitors4
Verizon Communications Inc. 5.10% 3.80% 4.31% 2.92% 8.35%

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,765 ÷ 437,536 = -0.63%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. AT&T Inc.’s economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Economic Profit Margin

AT&T Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (2,765) 1,366  (2,335) 268  2,355 
Operating revenues 181,193  170,756  160,546  163,786  146,801 
Performance Ratio
Economic profit margin2 -1.53% 0.80% -1.45% 0.16% 1.60%
Benchmarks
Economic Profit Margin, Competitors3
Verizon Communications Inc. 8.53% 6.25% 6.93% 4.29% 11.61%

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × -2,765 ÷ 181,193 = -1.53%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. AT&T Inc.’s economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.