Eli Lilly & Co. (NYSE:LLY)

The analysis of the financial data over the five-year period reveals several notable trends in profitability, capital costs, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a declining trend from 2020 through 2023, dropping from approximately $6.36 billion to about $3.09 billion. This represents a significant decrease in operating profitability over four years. However, in 2024, there is a marked recovery with NOPAT rising sharply to approximately $8.47 billion, surpassing the initial 2020 value.

Cost of Capital

The cost of capital has exhibited a gradual increase over the period, starting at 8.2% in 2020 and rising to approximately 8.59% in 2024. This steady upward movement indicates slightly higher required returns on invested capital, which could reflect changes in market conditions or company-specific risk factors.

Invested Capital

Invested capital has generally trended upward, with an initial increase from about $24.56 billion in 2020 to approximately $26.14 billion in 2021. Following a slight dip in 2022 to around $24.3 billion, invested capital increased significantly in the last two years, reaching approximately $35.8 billion by the end of 2024. This substantial growth in invested capital highlights increased investment activity or asset accumulation during the latter part of the period.

Economic Profit

Economic profit, which accounts for the cost of capital, follows a pattern similar to NOPAT but with more pronounced fluctuations. Starting at roughly $4.34 billion in 2020, economic profit decreases steadily to just above $0.56 billion in 2023, indicating a near erosion of value creation during that year. In 2024, economic profit experiences a strong rebound to about $5.39 billion, reflecting improved operational performance and possibly more efficient use of capital.

Overall, the financial data depict a period of declining profitability and economic value creation from 2020 to 2023, in the context of gradually increasing capital costs and fluctuating invested capital. The significant recovery in both NOPAT and economic profit in 2024, alongside the continued rise in invested capital, suggests a return to strong operational performance and improved value generation for shareholders at the end of the analyzed period.

The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) over the five-year period ending in 2024.

Net Income

Net income displayed a downward trend from 2020 to 2023, decreasing from 6,193,700 thousand US dollars in 2020 to 5,240,400 thousand US dollars in 2023. However, in 2024, net income surged significantly to 10,590,000 thousand US dollars, almost doubling the previous year’s figure. This sharp increase suggests an exceptional improvement in profitability during the final reported year.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a consistent decline throughout the period from 2020 through 2023, beginning at 6,357,340 thousand US dollars in 2020 and dropping steadily to 3,090,452 thousand US dollars in 2023. This represents a reduction of more than 50% over these years. However, in 2024, NOPAT rebounded strongly, rising to 8,466,038 thousand US dollars, indicating a considerable recovery in operating profitability after taxes.

Overall Insights

The downward trend in both net income and NOPAT from 2020 to 2023 may reflect operational challenges or increased costs impacting profitability. The significant rebound in 2024 for both metrics suggests a positive turnaround, possibly as a result of improved operational efficiency, cost management, or increased revenues. The divergence in magnitude between net income and NOPAT in 2024, with net income showing a larger increase, may imply changes in non-operating factors, tax strategies, or extraordinary items affecting the net income figure.

Income Taxes

The amount of income taxes showed a declining trend from 2020 to 2022, decreasing from approximately 1,036,200 thousand USD in 2020 to 561,600 thousand USD in 2022. This represents almost a halving over this period. However, starting in 2023, there was a significant increase in income taxes, rising sharply to about 1,314,200 thousand USD and continuing upward to 2,090,400 thousand USD in 2024. This reversal suggests a change in taxable income or tax strategy leading to a more than threefold increase from the 2022 low.

Cash Operating Taxes

Cash operating taxes exhibited a consistent year-over-year increase across the entire period. Beginning at roughly 1,244,662 thousand USD in 2020, the amount rose to 1,446,213 thousand USD in 2021. This upward trend accelerated considerably starting in 2022, with cash operating taxes reaching 2,811,147 thousand USD, then 3,731,159 thousand USD in 2023, and finally 4,911,605 thousand USD in 2024. The steady and strong growth in this metric indicates increasing operational tax expenses, potentially reflecting higher operating profits or changes in tax regulations impacting cash tax outflows.

Summary of Trends

Overall, while income taxes initially declined before a sharp increase in later years, cash operating taxes steadily increased every year with accelerating growth. This divergence suggests that while reporting or accrual-based tax expenses (income taxes) fluctuated, the actual cash tax payments consistently rose, implying increasing operational profitability or other factors driving higher taxation cash flows. The pronounced rise from 2022 onwards in both categories signals a significant change in the tax or operational landscape during this more recent period.

The financial data over the five-year period reveals notable trends regarding the company’s debt levels, equity, and invested capital.

Total reported debt & leases

This figure remained relatively stable from 2020 through 2022, fluctuating slightly around 17 billion US dollars. However, there was a significant increase starting in 2023, rising sharply to approximately 26.3 billion and further increasing to around 34.8 billion by the end of 2024. This upward trajectory indicates a substantial rise in debt and lease obligations in the most recent years.

Total Eli Lilly and Company shareholders’ equity

Shareholders’ equity showed a consistent upward trend throughout the period. It increased from about 5.6 billion in 2020 to nearly 9.0 billion in 2021, followed by further growth to approximately 10.6 billion in 2022. Although there was only a modest increase in 2023, equity rose notably again in 2024 to approximately 14.2 billion. This pattern reflects overall strengthening in the company’s equity base over the period.

Invested capital

Invested capital exhibited some volatility but generally increased over the five-year span. After a rise from about 24.6 billion in 2020 to 26.1 billion in 2021, it declined to 24.3 billion in 2022, suggesting some contraction or divestment activities. Subsequently, invested capital expanded significantly in the last two years, reaching approximately 29.4 billion in 2023 and 35.8 billion in 2024. This uptrend indicates increased allocation of resources, possibly for growth or expansion purposes.

In summary, the company’s financial structure demonstrates a rising reliance on debt from 2023 onward, accompanied by steady gains in shareholders’ equity. The invested capital reflects initial contraction followed by substantial growth, consistent with strategic investments or asset acquisitions. The combined trends suggest an aggressive capital deployment strategy supported by increased leverage and equity growth.

The financial data reveals notable fluctuations in the economic profit, invested capital, and economic spread ratio over the five-year period under review.

Economic Profit

Economic profit displayed a declining trend from 2020 to 2023, dropping from approximately 4.34 billion US dollars to just over 563 million US dollars. However, it experienced a significant rebound in 2024, surging to approximately 5.39 billion US dollars, which is the highest value recorded during the period.

Invested Capital

Invested capital generally increased over the period, with some volatility. Starting at around 24.56 billion US dollars in 2020, it rose to approximately 26.14 billion in 2021, decreased to about 24.30 billion in 2022, then increased substantially to roughly 29.38 billion in 2023 and continued its upward trajectory, reaching approximately 35.80 billion in 2024. This pattern indicates considerable investment activities with a marked acceleration in the latter years.

Economic Spread Ratio

The economic spread ratio, reflecting the return relative to invested capital, mirrored the trend in economic profit. It declined from 17.69% in 2020 to a low of 1.92% in 2023, signaling a significant reduction in economic returns during that period. In 2024, the ratio rebounded strongly to 15.06%, indicating improved profitability relative to invested capital.

Overall, the data indicates a period of decreasing profitability and economic returns through 2023, despite generally increasing invested capital. The sharp recovery in 2024 suggests either improved operational performance or changes in capital efficiency, leading to enhanced economic profit and spread ratio. This recovery after a period of subdued returns is a critical point for further investigation to understand the underlying drivers of performance improvement.

Revenue

The revenue shows a consistent upward trend over the five-year period. Starting from approximately 24.54 billion US dollars in 2020, revenue increased steadily each year, reaching about 45.04 billion US dollars by 2024. This indicates robust growth in the company's sales or service income throughout the time frame.

Economic Profit

Economic profit exhibits significant variability across the years. It peaked in 2020 at approximately 4.34 billion US dollars, then declined sharply over the next three years, bottoming out in 2023 at around 563 million US dollars. Subsequently, there was a strong recovery in 2024, with economic profit rising to approximately 5.39 billion US dollars, surpassing the initial 2020 level. This pattern suggests fluctuating operational efficiency or cost management impacts before a notable improvement in the latest year.

Economic Profit Margin

The economic profit margin follows a downward trajectory from 17.7% in 2020 to a low of 1.65% in 2023, indicating a compression of profit relative to revenue during these years. However, in 2024 there is a marked recovery to 11.97%, reflecting an enhancement in the company’s profitability relative to its revenue. Despite not fully returning to the 2020 margin, this rebound signifies improved economic profitability dynamics recently.

Overall Analysis

The financial data display a pattern where revenue growth is consistent and strong, signaling successful top-line performance. However, economic profit and its margin experienced a dip in the mid-period between 2021 and 2023, possibly due to increased costs, investments, or other factors reducing profitability efficiency. The sharp recovery in 2024 suggests positive changes in either operational efficiency or cost structures, driving a meaningful improvement in economic profit and its margin. The divergence between steadily increasing revenue and volatile economic profit indicates areas where profitability management may have faced challenges but shows resilience and improvement by the end of the period.