Boeing Co. (NYSE:BA)

The period under review demonstrates significant fluctuations in economic profit. Initial years exhibit substantial negative economic profit, followed by a period of improvement, and then a sharp decline before a partial recovery. A detailed examination of the contributing factors reveals a complex interplay between net operating profit after taxes, cost of capital, and invested capital.

Net Operating Profit After Taxes (NOPAT)

NOPAT initially shows negative values in 2021 and 2022, deepening the loss before a considerable reduction in the negative value in 2023. However, NOPAT experiences a dramatic decrease in 2024, reaching its lowest point during the analyzed period. A substantial positive shift is then observed in 2025, indicating a significant turnaround in operational profitability.

Cost of Capital

The cost of capital exhibits a generally increasing trend throughout the period. Starting at 13.71% in 2021, it rises to 15.61% in 2025. While the increases are relatively modest year-over-year, the cumulative effect contributes to a higher hurdle rate for generating positive economic profit.

Invested Capital

Invested capital fluctuates over the five-year period. It increases from 2021 to 2022, then decreases in 2023. A subsequent increase is seen in 2024, followed by a further increase in 2025, reaching the highest level of invested capital during the period. These changes in invested capital influence the overall economic profit calculation.

Economic Profit

Economic profit remains negative for the entirety of the analyzed period, although the magnitude of the loss varies considerably. The largest negative economic profit is recorded in 2024, coinciding with the lowest NOPAT and a relatively high cost of capital. While the negative economic profit lessens in 2025, it remains substantial, suggesting that the company’s returns are still not exceeding its cost of capital despite the improvement in NOPAT.

The correlation between NOPAT and economic profit is strong. The substantial decline in NOPAT in 2024 directly corresponds to the largest negative economic profit. The positive shift in NOPAT in 2025 leads to a reduction in the economic loss, but the continued negative value indicates that returns have not yet surpassed the cost of capital. The increasing cost of capital throughout the period also exerts downward pressure on economic profit, requiring higher NOPAT levels to achieve positive economic profit.

The financial performance, as indicated by Net Earnings attributable to Boeing shareholders and Net Operating Profit After Taxes (NOPAT), demonstrates significant volatility over the five-year period. Both metrics experienced substantial fluctuations, transitioning from negative values to positive in the final year examined.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a generally negative trend from 2021 to 2023, starting at -US$2,649 million, decreasing to -US$2,910 million, and then reaching -US$77 million. A dramatic decline occurred in 2024, with NOPAT falling to -US$10,234 million. However, a substantial recovery is observed in 2025, with NOPAT reaching a positive US$5,245 million. This represents a significant turnaround from the preceding year’s loss.

The movement in NOPAT closely mirrors the trend in Net Earnings attributable to Boeing shareholders. Both metrics show considerable losses in 2021, 2022, and 2024, followed by a return to profitability in 2025. The magnitude of the loss in 2024 for both metrics is notably larger than in the prior loss-making years.

Relationship between NOPAT and Net Earnings

While both metrics move in the same direction, the absolute values differ. Net Earnings consistently report larger losses than NOPAT in 2021, 2022, and 2024. This suggests that factors outside of core operating performance, such as financing costs or non-operating items, are contributing to the overall net loss. The difference between the two metrics narrows in 2023 and reverses in 2025, indicating a stronger correlation between operating performance and overall profitability in the final year.

The substantial shift to positive NOPAT in 2025 suggests a potential improvement in operational efficiency or a favorable change in the business environment. Further investigation would be required to determine the specific drivers behind this turnaround.

The relationship between income tax expense and cash operating taxes demonstrates notable fluctuations over the five-year period. A significant divergence is apparent between reported income tax expense and the actual cash outflow for taxes.

Income Tax Expense

Income tax expense exhibits considerable volatility. A substantial benefit was recorded in 2021, followed by relatively small expenses in 2022 and 2023. A significant expense was then reported in 2024, before returning to a positive expense in 2025, though not reaching the level of 2023.

Cash Operating Taxes

Cash operating taxes demonstrate a generally increasing trend, despite yearly variations. Values rose from 676 in 2021 to 736 in 2023, experienced a decrease to 508 in 2024, and then increased substantially to 899 in 2025. This suggests a consistent, underlying tax obligation, with fluctuations potentially related to timing differences or tax planning strategies.

Relationship between Income Tax Expense and Cash Taxes

The difference between income tax expense and cash operating taxes is substantial in each year. The 2021 benefit in income tax expense contrasts sharply with the 676 million in cash taxes paid, indicating deferred tax liabilities were likely being reduced. The divergence continues in subsequent years, suggesting ongoing differences between book and tax accounting methods. The largest difference is observed in 2024, where a significant income tax expense is offset by a lower cash tax payment.

The consistent positive values for cash operating taxes, even during periods of reported income tax benefits, suggest the entity consistently remits cash for tax obligations. The fluctuations in income tax expense likely reflect the impact of temporary differences, tax credits, or changes in tax laws, while cash taxes represent the actual cash outflows for tax liabilities.

The invested capital of the company exhibited fluctuations over the five-year period. Total reported debt & leases generally decreased before increasing again, while shareholders’ equity experienced a significant shift from a substantial deficit to a positive value. These movements collectively influenced the overall trend in invested capital.

Total Reported Debt & Leases

Total reported debt & leases decreased from US$59,641 million in 2021 to US$54,121 million in 2023, representing a reduction of approximately 9.3%. However, it then increased to US$55,958 million in 2024 and further to US$56,365 million in 2025. This suggests a period of debt reduction followed by renewed borrowing or lease obligations.

Shareholders’ Equity (Deficit)

Shareholders’ equity began as a significant deficit of US$-14,999 million in 2021 and continued to worsen, reaching a deficit of US$-17,233 million in 2023. A dramatic turnaround occurred in 2024, with the deficit substantially reduced to US$-3,908 million. By 2025, shareholders’ equity had become positive, reaching US$5,454 million. This indicates a significant improvement in the company’s net asset position.

Invested Capital

Invested capital initially increased from US$49,465 million in 2021 to US$50,866 million in 2022, a rise of approximately 2.8%. It then decreased to US$44,905 million in 2023, coinciding with the continued negative shareholders’ equity. Invested capital rebounded in 2024 to US$50,271 million and continued to rise to US$53,662 million in 2025, driven by the improvement in shareholders’ equity and the stabilization of debt levels. The overall trend suggests a period of capital contraction followed by a recovery and expansion.

The substantial shift in shareholders’ equity is a key driver of the changes observed in invested capital. The company’s ability to move from a significant deficit to a positive equity position represents a notable financial achievement and supports the increase in invested capital observed in the later years of the period.

The economic spread ratio exhibited considerable fluctuation between 2021 and 2025. Initially negative, the ratio worsened significantly before showing signs of improvement. Economic profit demonstrated a similar pattern of volatility, moving from substantial losses to a reduced loss position by the end of the period. Invested capital experienced a moderate increase overall, though with a notable decrease in 2023.

Economic Spread Ratio

The economic spread ratio began at -19.07% in 2021 and decreased to -20.46% in 2022, indicating a widening gap between the company’s return on invested capital and its cost of capital. A slight improvement was observed in 2023, with the ratio increasing to -15.08%. However, 2024 saw a substantial decline to -35.14%, representing the most significant underperformance relative to the cost of capital during the analyzed period. The ratio improved considerably in 2025, reaching -5.84%, suggesting a narrowing of the gap and a move towards more favorable economic returns.

Economic Profit

Economic profit remained negative throughout the five-year period. Losses totaled US$9,431 million in 2021 and increased to US$10,409 million in 2022. A reduction in the loss was noted in 2023, with economic profit reported at -US$6,770 million. The loss expanded dramatically in 2024 to -US$17,665 million, before decreasing to -US$3,134 million in 2025. This suggests a potential stabilization or improvement in profitability towards the end of the period, though still resulting in an overall loss.

Invested Capital

Invested capital increased from US$49,465 million in 2021 to US$50,866 million in 2022. A decrease was observed in 2023, with invested capital falling to US$44,905 million. The level of invested capital then rose to US$50,271 million in 2024 and continued to increase to US$53,662 million in 2025. This indicates a period of capital reduction followed by reinvestment and growth.

The interplay between these metrics suggests that while the company has been increasing its invested capital, it has struggled to generate returns exceeding its cost of capital, particularly in 2024. The improvement in both the economic spread ratio and economic profit in 2025 indicates a potential positive shift, but continued monitoring is warranted to confirm a sustained trend.

The economic profit margin exhibited significant fluctuations between 2021 and 2025. Initially negative, the margin worsened considerably before showing signs of improvement. A detailed examination of the trends reveals a complex performance pattern.

Economic Profit Margin Trend

In 2021, the economic profit margin stood at -15.14%. This negative margin persisted in 2022, declining further to -15.63%. A notable, though incomplete, recovery was observed in 2023, with the margin improving to -8.70%. However, 2024 witnessed a substantial deterioration, reaching -26.56%, the lowest point in the observed period. Finally, 2025 showed a significant positive shift, with the margin increasing to -3.50%, indicating a considerable, albeit still negative, improvement.

Relationship to Revenues

Revenues generally increased over the period, moving from US$62,286 million in 2021 to US$89,463 million in 2025. However, revenue growth did not consistently translate into improved economic profitability. The largest revenue increase occurred between 2022 and 2023 (US$11,186 million), coinciding with a moderate improvement in the economic profit margin. Conversely, a decrease in revenues from 2023 to 2024 (US$11,277 million) was accompanied by a dramatic worsening of the economic profit margin. The substantial revenue increase in 2025 (US$22,946 million) was associated with a significant, though incomplete, recovery in the economic profit margin.

Economic Profit

Economic profit itself followed a volatile pattern. While negative throughout the period, the absolute value of the loss decreased from US$-10,409 million in 2022 to US$-6,770 million in 2023. The loss then increased substantially to US$-17,665 million in 2024 before decreasing to US$-3,134 million in 2025. This movement in economic profit directly influences the economic profit margin.

The observed trends suggest that revenue increases alone are insufficient to guarantee improved economic profitability. Factors beyond revenue generation, impacting the cost of capital and operational efficiency, appear to play a crucial role in determining the economic profit margin. The significant margin decline in 2024, despite a revenue decrease, warrants further investigation into the underlying causes of this performance.