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.
Paying user area
Try for free
Carrier Global Corp. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Debt to Equity since 2020
- Price to Earnings (P/E) since 2020
- Aggregate Accruals
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Carrier Global Corp. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Carrier Global Corp., economic profit calculation
US$ in millions
| 12 months ended: | 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: 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 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial performance between 2020 and 2022 demonstrates a transition from value destruction to value creation. After two years of negative economic profit, a significant increase in operational efficiency in 2022 allowed the company to generate returns exceeding its cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited volatility over the three-year period. An initial decline was observed from US$ 2,367 million in 2020 to US$ 1,932 million in 2021. This was followed by a substantial recovery in 2022, where NOPAT surged to US$ 3,800 million, nearly doubling the previous year's result.
- Cost of Capital and Invested Capital
- The cost of capital showed a steady upward trajectory, increasing from 14.71% in 2020 to 15.66% in 2021, and reaching 16.29% by 2022. Meanwhile, invested capital remained relatively stable, experiencing a minor dip to US$ 18,835 million in 2021 before rising to US$ 19,880 million in 2022.
- Economic Profit Trends
- Economic profit was negative in both 2020 and 2021, with the deficit widening from US$ 432 million to US$ 1,017 million. This trend indicates that the business was unable to generate sufficient operating profit to cover the imputed cost of its invested capital during this timeframe. A pivotal shift occurred in 2022, when economic profit turned positive at US$ 562 million, signifying that the growth in NOPAT effectively outpaced both the rising cost of capital and the increase in invested capital.
Net Operating Profit after Taxes (NOPAT)
Carrier Global Corp., NOPAT calculation
US$ in millions
Based on: 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 allowance for expected credit losses.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in product warranty provisions.
5 Addition of increase (decrease) in restructuring reserve.
6 Addition of increase (decrease) in equity equivalents to net income attributable to common shareowners.
7 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income attributable to common shareowners.
The analysis of the financial data over the three reported years reveals notable fluctuations in key profitability metrics, specifically net income attributable to common shareowners and net operating profit after taxes (NOPAT).
- Net income attributable to common shareowners
- This measure shows a decrease from 1982 million US dollars in 2020 to 1664 million US dollars in 2021, indicating a reduction of approximately 16%. However, in 2022, there is a significant recovery and growth, with net income rising sharply to 3534 million US dollars. This represents more than a doubling from the prior year and an overall increase compared to 2020. The pattern suggests that while 2021 experienced a dip in profitability, 2022 saw a robust improvement and strong earnings performance.
- Net operating profit after taxes (NOPAT)
- Like net income, NOPAT declined from 2367 million US dollars in 2020 to 1932 million US dollars in 2021, reflecting a decrease of approximately 18%. In 2022, NOPAT rebounded substantially to 3800 million US dollars, surpassing both previous years. This improvement in NOPAT illustrates enhanced operational efficiency and a stronger bottom-line operating profit after accounting for taxes during the most recent year.
Overall, the data presents a trend of initial earnings contraction in 2021, potentially due to external or internal challenges affecting profitability, followed by a marked recovery and growth in 2022. The increase in both net income and NOPAT in 2022 underscores a positive shift in financial performance and operational results. This recovery phase suggests successful strategic or operational adjustments leading to substantial value creation for shareholders.
Cash Operating Taxes
Carrier Global Corp., cash operating taxes calculation
US$ in millions
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|
| Income tax expense | ||||
| Less: Deferred income tax expense (benefit) | ||||
| Add: Tax savings from interest expense | ||||
| Cash operating taxes |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data for the periods ending December 31, 2020, 2021, and 2022 reveal the following trends in tax-related expenses.
- Income Tax Expense
- The income tax expense shows a decline from US$ 849 million in 2020 to US$ 699 million in 2021, representing a significant decrease. However, in 2022, income tax expense exhibited a slight increase to US$ 708 million. Overall, the expense decreased year-over-year from 2020 to 2022, but the change from 2021 to 2022 indicates a modest upward adjustment.
- Cash Operating Taxes
- The cash operating taxes consistently increased over the three years. Starting from US$ 820 million in 2020, it rose to US$ 844 million in 2021, and further increased to US$ 900 million in 2022. This steady upward trend may indicate higher cash tax obligations or changes in operating taxable income over the observed period.
In summary, while reported income tax expenses decreased initially and then slightly increased, cash taxes paid showed a consistent rise. This divergence may suggest timing differences between recognized tax expense and actual cash tax payments, or changes in tax planning, credits, or provisions affecting the income tax expense recognition.
Invested Capital
Carrier Global Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 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 LIFO reserve. See details »
5 Addition of product warranty provisions.
6 Addition of restructuring reserve.
7 Addition of equity equivalents to equity attributable to common shareowners.
8 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- There is a clear downward trend in total reported debt and leases over the three-year period. The value decreased from $11,030 million at the end of 2020 to $10,353 million in 2021, and further declined to $9,503 million by the end of 2022. This indicates a consistent reduction in the company's leverage or obligations related to debt and leases.
- Equity attributable to common shareowners
- Equity attributable to common shareowners shows a steady increase each year. Starting at $6,252 million in 2020, it rose to $6,767 million in 2021 and further increased to $7,758 million in 2022. This growth suggests improvements in the company's net worth and possibly retained earnings or capital infusion over the period.
- Invested capital
- Invested capital remained relatively stable in 2020 and 2021, with a slight decrease from $19,032 million to $18,835 million. However, there was a notable increase to $19,880 million in 2022. This indicates a modest growth in the total capital deployed in the company’s operations by the end of the third year.
Cost of Capital
Carrier Global Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (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 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (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 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Carrier Global Corp., economic spread ratio calculation, comparison to benchmarks
| 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 | ||||
| Honeywell International Inc. | ||||
| Lockheed Martin Corp. | ||||
| RTX Corp. | ||||
Based on: 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 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of economic value creation over the three-year period reveals a significant turnaround in financial performance, transitioning from a period of value destruction to value generation by the end of 2022.
- Economic Profit
- A volatile trend is observed in economic profit, which began at a deficit of US$ 432 million in 2020 and deepened to a loss of US$ 1,017 million in 2021. However, a substantial recovery occurred in 2022, with the figure pivoting to a positive US$ 562 million, indicating that the company's net operating profit exceeded its cost of capital for the first time in the observed period.
- Invested Capital
- Invested capital remained relatively stable across the period, showing minor fluctuations. A slight decrease from US$ 19,032 million in 2020 to US$ 18,835 million in 2021 was followed by an increase to US$ 19,880 million in 2022. This suggests that the improvements in economic profit were not the result of a reduction in the capital base, but rather an increase in the efficiency or returns generated by that capital.
- Economic Spread Ratio
- The economic spread ratio mirrors the trajectory of economic profit, reflecting the spread between the return on invested capital and the cost of capital. The ratio declined from -2.27% in 2020 to a low of -5.40% in 2021, marking a period of intensified value erosion. By 2022, the ratio shifted to a positive 2.83%, confirming a successful reversal in the company's ability to create economic value.
Economic Profit Margin
Carrier Global Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Economic profit1 | ||||
| Net sales | ||||
| Performance Ratio | ||||
| Economic profit margin2 | ||||
| Benchmarks | ||||
| Economic Profit Margin, Competitors3 | ||||
| Boeing Co. | ||||
| Caterpillar Inc. | ||||
| Eaton Corp. plc | ||||
| GE Aerospace | ||||
| Honeywell International Inc. | ||||
| Lockheed Martin Corp. | ||||
| RTX Corp. | ||||
Based on: 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 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance over the observed three-year period reflects a significant turnaround in economic value creation, transitioning from a period of economic loss to positive economic profit by the end of 2022.
- Economic Profit Volatility
- Economic profit experienced a notable decline between 2020 and 2021, moving from negative 432 million USD to negative 1,017 million USD. A substantial recovery occurred in 2022, with the figure shifting to a positive 562 million USD, indicating that the company began generating returns in excess of its cost of capital.
- Net Sales Correlation
- Net sales grew from 17,456 million USD in 2020 to 20,613 million USD in 2021, representing a period of revenue expansion. Sales remained relatively stable in 2022 at 20,421 million USD. This suggests that the recovery in economic profit in the final year was not driven by top-line growth, but rather by improvements in operational efficiency or a reduction in the capital charge.
- Economic Profit Margin Trends
- The economic profit margin followed a V-shaped trajectory, contracting from negative 2.48% in 2020 to negative 4.93% in 2021, before rebounding to 2.75% in 2022. The contraction in 2021 occurred despite an increase in net sales, while the shift to a positive margin in 2022 confirms a restoration of value creation relative to revenue generated.