Economic Value Added (EVA)
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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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Altria Group Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
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Economic Profit
Altria Group Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates significant fluctuations in economic profit. Initially, the company experienced a substantial loss, followed by periods of profit and loss before achieving considerable gains in the most recent year. These shifts are influenced by changes in net operating profit after taxes, cost of capital, and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a dramatic increase from a loss of US$482 million in 2019 to a profit of US$5,245 million in 2020. This was followed by a decrease to US$2,233 million in 2021, then a rise to US$5,753 million in 2022, culminating in a further increase to US$8,681 million in 2023. This indicates improving operational performance over the period, particularly in the latter years.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating between 10.13% and 10.92% throughout the period. A slight upward trend was observed from 2020 to 2022, followed by a decrease in 2023. These changes are relatively minor and do not appear to be a primary driver of the observed economic profit fluctuations.
- Invested Capital
- Invested capital decreased consistently from US$42,624 million in 2019 to US$28,647 million in 2023. This continuous decline in capital employed, coupled with the NOPAT trends, significantly impacts the economic profit calculation.
- Economic Profit
- Economic profit mirrored the NOPAT trend, starting with a loss of US$4,882 million in 2019. It became positive in 2020 at US$1,042 million, then negative again in 2021 at US$1,329 million. A substantial increase in economic profit was observed in 2022 (US$2,608 million), continuing to a significant gain of US$5,642 million in 2023. The increasing economic profit in the final two years suggests the company is generating returns exceeding its cost of capital, despite the decreasing invested capital base.
The substantial improvement in economic profit from 2022 to 2023 is noteworthy. This is likely attributable to the combined effect of increased NOPAT and the continued reduction in invested capital, indicating improved capital efficiency. The initial loss in 2019 and subsequent volatility highlight the sensitivity of economic profit to changes in operational performance and capital allocation.
Net Operating Profit after Taxes (NOPAT)
Altria Group Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net earnings (losses) attributable to Altria.
4 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
5 Addition of after taxes interest expense to net earnings (losses) attributable to Altria.
6 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
7 Elimination of after taxes investment income.
- Net earnings (losses) attributable to Altria
- The net earnings attributable to the company demonstrated significant volatility over the analyzed period. In 2019, the company reported a net loss of $1,293 million. However, a substantial recovery occurred in 2020, with net earnings increasing sharply to $4,467 million. This positive trend continued, albeit with fluctuations, as earnings decreased to $2,475 million in 2021 before rising again to $5,764 million in 2022 and further to $8,130 million in 2023. Overall, the data indicates a strong recovery and growth in earnings after the initial loss in 2019.
- Net operating profit after taxes (NOPAT)
- NOPAT mirrored the pattern observed in net earnings, starting with a negative value of $482 million in 2019. This figure increased significantly to $5,245 million in 2020, reflecting improved operational profitability. After a decline to $2,233 million in 2021, NOPAT rebounded to $5,753 million in 2022 and further increased to $8,681 million in 2023. These trends signify a recovery in operating performance, with NOPAT surpassing net earnings figures consistently from 2020 onward, indicating effective operational management and tax impact considerations.
Cash Operating Taxes
Altria Group Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
- Provision (benefit) for income taxes
- The provision for income taxes experienced fluctuations over the five-year period. Starting at 2,064 million USD in 2019, it rose substantially to 2,436 million USD in 2020. A marked decline occurred in 2021, with the provision dropping to 1,349 million USD, followed by a moderate increase to 1,625 million USD in 2022. In 2023, the provision escalated sharply to 2,798 million USD, reaching its highest level in the observed period.
- Cash operating taxes
- Cash operating taxes showed a consistent upward trend across the years. The amount increased from 2,428 million USD in 2019 to 2,854 million USD in 2020. Although there was a minor decrease in 2021 to 2,753 million USD, the overall trajectory remained positive, with values climbing to 2,794 million USD in 2022 and further rising to 3,236 million USD in 2023. This indicates a steady growth in cash outflows related to operating taxes over the period.
- Comparative Insights
- While cash operating taxes demonstrated a relatively stable and progressive increase, the provision for income taxes displayed more volatility, with notable decreases and increases. The divergence between provision and cash taxes in some years, particularly in 2021 and 2023, could suggest variations in deferred tax accounting or changing tax planning strategies. The significant rise in both provisions and cash taxes in 2023 warrants careful examination to understand underlying drivers such as changes in taxable income or tax rates.
Invested Capital
Altria Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred taxes from assets and liabilities. See details »
2 Addition of LIFO reserve. See details »
3 Addition of equity equivalents to stockholders’ equity (deficit) attributable to Altria.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
- Total reported debt & leases
-
The total reported debt and leases show a relatively stable yet slightly declining trend over the five-year period. Starting at $28,042 million in 2019, the figure increased moderately to $29,471 million in 2020, signaling a short-term rise in liabilities. However, from 2021 onwards, the debt levels consistently decreased each year, falling to $28,044 million in 2021, $26,680 million in 2022, and further down to $26,233 million in 2023. This pattern suggests an effort to reduce overall debt and lease obligations after a peak in 2020.
- Stockholders’ equity (deficit) attributable to Altria
-
The stockholders' equity attributable to the company experienced a marked and continuous decline throughout the period. Beginning at $6,222 million in 2019, equity reduced sharply to $2,839 million in 2020. In 2021, equity became negative, registering at -$1,606 million, indicating that liabilities exceeded assets. The negative trend intensified in subsequent years, reaching -$3,973 million in 2022 and slightly improving to -$3,540 million in 2023. This deterioration reflects possible sustained losses, share repurchases, or other factors diminishing equity value over time.
- Invested capital
-
Invested capital demonstrated a clear downward trend from 2019 through 2023. It started relatively high at $42,624 million in 2019, followed by a moderate decline to $41,498 million in 2020. The reduction accelerated thereafter, with invested capital dropping to $33,524 million in 2021, and further to $28,802 million in 2022 and $28,647 million in 2023. The consistent decrease in invested capital suggests contraction in assets employed in the business or disposition of investments over the analyzed timeframe.
Cost of Capital
Altria Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
Economic Spread Ratio
Altria Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited significant fluctuations between 2019 and 2023. Initially negative, the ratio demonstrated improvement over the period, culminating in a substantial increase by the end of 2023. This analysis details the observed trends and potential implications.
- Economic Spread Ratio Trend
- In 2019, the economic spread ratio was -11.45%, indicating that the company’s return on invested capital was less than its cost of capital. A positive shift occurred in 2020, with the ratio rising to 2.51%, suggesting the company began generating returns exceeding its cost of capital. However, this improvement was not sustained, as the ratio decreased to -3.96% in 2021, reverting to a position where returns were insufficient to cover the cost of capital. A notable recovery commenced in 2022, with the ratio increasing to 9.06%, and continued strongly into 2023, reaching 19.70%. This represents a considerable improvement in the company’s ability to generate value from its invested capital.
The economic spread ratio’s movement correlates with changes in economic profit. The negative ratios in 2019 and 2021 align with periods of negative economic profit, while the positive ratios in 2020, 2022, and 2023 correspond with positive economic profit. The magnitude of the ratio increase in 2023 suggests a substantial improvement in the efficiency with which capital is being deployed and utilized.
- Invested Capital Relationship
- Invested capital decreased consistently from 2019 to 2022, falling from US$42,624 million to US$28,802 million. This decline was arrested in 2023, with invested capital remaining relatively stable at US$28,647 million. The increasing economic spread ratio in the context of decreasing invested capital suggests improved capital efficiency, as the company generated greater returns with a smaller capital base.
The substantial increase in the economic spread ratio in 2023 warrants further investigation to understand the drivers behind this improvement. Potential factors could include increased operational efficiency, favorable market conditions, or strategic shifts in capital allocation.
Economic Profit Margin
Altria Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuation between 2019 and 2023. Initially negative, it demonstrated improvement before declining again, ultimately reaching a peak in the most recent year. A detailed examination of the trends is presented below.
- Economic Profit Margin
- In 2019, the economic profit margin was -19.44%. This indicates that the company’s economic profit was substantially negative relative to its net revenues. A substantial shift occurred in 2020, with the margin increasing to 3.99%, signifying a move towards positive economic profit. However, this improvement was not sustained, as the margin decreased to -5.11% in 2021, reflecting a return to negative economic profit.
- A notable positive trend emerged in 2022, with the economic profit margin rising to 10.39%. This suggests improved efficiency in capital allocation and profitability. The most recent year, 2023, saw a further and substantial increase, with the margin reaching 23.05%. This represents the highest margin observed during the analyzed period and indicates a significant enhancement in the generation of economic profit relative to net revenues.
The economic profit margin’s trajectory mirrors the fluctuations in economic profit itself. The negative margins in 2019 and 2021 correspond with negative economic profit values, while the positive margins in 2020, 2022, and 2023 align with positive economic profit. The increasing magnitude of the margin in recent years suggests that improvements in economic profit are accelerating relative to the company’s revenue base.
- Net Revenues
- Net revenues experienced a modest increase from 2019 to 2020, rising from US$25,110 million to US$26,153 million. A slight decrease was observed in 2021, with revenues falling to US$26,013 million. A more pronounced decline occurred in 2022, with revenues decreasing to US$25,096 million. This downward trend continued into 2023, with revenues reaching US$24,483 million.
- Despite the declining revenue trend, the substantial increase in the economic profit margin in 2023 suggests that the company has been able to improve its profitability and efficiency in capital utilization even as revenue decreased. This indicates effective cost management or improved pricing strategies.
In conclusion, while net revenues have generally decreased since 2020, the economic profit margin has demonstrated a strong upward trend, particularly in the latest two years. This suggests a growing ability to generate economic profit despite the revenue challenges.