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.
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GE Aerospace pages available for free this week:
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Dividend Discount Model (DDM)
- Current Ratio since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Debt
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Economic Profit
GE Aerospace, economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | 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: 2024-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial analysis reveals significant fluctuations and notable trends over the five-year period examined.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures display considerable volatility. After a substantial profit of 6,132 million US dollars in 2020, there was a marked decline to a loss of 1,820 million US dollars in 2021. The metric then recovered to a modest positive value of 1,827 million US dollars in 2022, followed by a sharp increase to a peak of 10,514 million US dollars in 2023. In 2024, there was a decline to 7,561 million US dollars, though it remained significantly above the earlier years excluding 2023. This pattern suggests periods of operational difficulty followed by strong profitability gains.
- Cost of Capital
- The cost of capital demonstrated a steady upward trend throughout the period. Starting at 10.08% in 2020, it increased annually to reach 15.75% in 2024. This escalation indicates rising expenses associated with financing and investment risk, which could affect investment decisions and valuation.
- Invested Capital
- Invested capital shows a consistent and significant decline over the years, dropping from 117,528 million US dollars in 2020 to 37,678 million US dollars by 2024. This reduction may imply divestitures, asset sales, or operational downsizing, reflecting a considerable contraction in the scale of investment or asset base.
- Economic Profit
- Economic profit was negative for the first three years, declining from -5,712 million US dollars in 2020 to -10,802 million in 2021, and then improving slightly to -6,705 million in 2022. However, it turned positive in 2023 with 2,948 million US dollars and decreased to 1,626 million in 2024, still maintaining a profit. The turn to positive economic profit aligns with the improvement in NOPAT and reduction in invested capital, suggesting enhanced value creation during the later years.
Overall, the data depict a company experiencing early operational and economic challenges, followed by a period of recovery and improved profitability. The increasing cost of capital and shrinking invested capital highlight changing financial conditions and possibly a strategic shift towards leaner operations. Positive economic profit in the final years indicates an increasing capacity to generate returns above the cost of capital, pointing toward better financial health and efficiency.
Net Operating Profit after Taxes (NOPAT)
GE Aerospace, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred income.
4 Addition of increase (decrease) in liability for product warranties.
5 Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to the Company.
6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2024 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net earnings (loss) attributable to the Company.
9 Elimination of discontinued operations.
The financial data reveals significant fluctuations in the profitability metrics over the five-year period examined. Both net earnings attributable to the company and net operating profit after taxes (NOPAT) exhibit notable volatility, reflecting changing operational performance and possibly external factors impacting the business environment.
- Net Earnings (Loss) Attributable to the Company
- Initially, the net earnings were positive at approximately 5.7 billion USD in 2020. However, there was a sharp decline in 2021, resulting in a substantial loss of about 6.52 billion USD. The company managed to recover in 2022, returning to a modest profit of 225 million USD. This positive trend accelerated in 2023, with net earnings reaching a peak of 9.48 billion USD. In 2024, earnings slightly decreased but remained strong at 6.56 billion USD, indicating sustained profitability beyond the prior years’ challenges.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures largely mirror the trends observed in net earnings, though the fluctuations are somewhat less extreme. Starting at roughly 6.13 billion USD in 2020, NOPAT dropped to a negative 1.82 billion USD in 2021. The subsequent years saw a recovery trajectory, with positive values of 1.83 billion USD in 2022, followed by a significant jump to over 10.5 billion USD in 2023. In 2024, while there was a decrease relative to the peak, NOPAT remained strong at roughly 7.56 billion USD.
Overall, the data suggest that the company experienced a period of considerable financial distress in 2021, interrupting otherwise strong profitability. The recovery through 2022 to 2024 is notable, with both net earnings and NOPAT exceeding initial 2020 levels in the latest years. This recovery indicates improved operational efficiency or favorable market conditions contributing to restored and enhanced profitability. However, the dip in 2024 compared to 2023 highlights the potential for variability and the need for ongoing monitoring of factors influencing financial performance.
Cash Operating Taxes
GE Aerospace, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
The data reveals significant fluctuations in the provision (benefit) for income taxes over the five-year period. Initially, there was a substantial tax benefit recorded in 2020 and 2021, with values of -474 million USD and -286 million USD respectively. However, starting in 2022, the figures shifted dramatically to positive values, indicating tax provisions rather than benefits, peaking at 1,162 million USD in 2023 before slightly declining to 962 million USD in 2024. This reversal suggests a marked change in tax expense recognition, possibly due to changes in profitability, tax laws, or accounting policies.
Cash operating taxes exhibit a different pattern with a sharp decline from 3,167 million USD in 2020 to 141 million USD in 2021. Subsequently, cash operating taxes increased to 1,464 million USD in 2022, followed by a decrease to 793 million USD in 2023. The figure rose again to 999 million USD in 2024. This volatility indicates considerable variability in actual tax payments, which may be influenced by changes in taxable income, timing differences in tax payments, or adjustments related to previous years.
- Provision (Benefit) for Income Taxes Trends
- From 2020 to 2021, a consistent tax benefit was recorded, indicating either losses or tax credits recognized during this period. The switch to positive tax provisions from 2022 through 2024 suggests an improved profitability or a shift in tax strategy, potentially reflecting increased earnings or changes in deferred tax accounting.
- Cash Operating Taxes Trends
- The significant drop in 2021 cash taxes could reflect timing or recognition differences, possibly due to tax relief measures or payment deferrals. The increases in 2022 and 2024 may indicate higher taxable earnings or reduced tax reliefs. The dip in 2023 contrasts with the increased tax provision for the same year, implying a temporary delay or variance in tax payments versus accruals.
- Overall Tax Expense Insights
- The divergence between provision for income taxes and cash operating taxes, particularly visible in 2023, points to differences in accrual accounting and actual cash outflows. This may impact cash flow management and tax planning strategies. The general trend towards higher tax provisions since 2022 may reflect a return to sustained profitability or changes in the company's tax position.
Invested Capital
GE Aerospace, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 deferred income.
5 Addition of liability for product warranties.
6 Addition of equity equivalents to shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of leasehold costs and manufacturing plant under construction.
The financial data reveals several significant trends in the company’s debt, equity, and invested capital over the five-year period from 2020 to 2024.
- Total reported debt & leases
- There is a marked decline in total reported debt and leases, decreasing substantially from US$78,039 million in 2020 to US$20,378 million in 2024. This represents a reduction of almost 74%, indicating a strong deleveraging trend and possibly a strategic focus on reducing financial obligations over the period.
- Shareholders’ equity
- Shareholders’ equity increased from US$35,552 million in 2020 to a peak of US$40,310 million in 2021. After this peak, equity declined steadily each year, reaching US$19,342 million by the end of 2024. This reduction after 2021 suggests challenges in maintaining equity levels, which may be due to factors such as net losses, dividend payments, share repurchases, or other equity-consuming activities.
- Invested capital
- Invested capital significantly decreased from US$117,528 million in 2020 to US$37,678 million in 2024. The decline is pronounced and continuous every year, reflecting both the substantial reduction in debt and the drop in shareholders’ equity. This overall shrinkage in invested capital could indicate divestitures, asset disposals, or a strategic downsizing of the capital base.
Overall, the data suggests a concerted effort to reduce leverage and shrink the invested capital base, while equity levels have faced downward pressure since 2021. The combined trends point to significant restructuring or operational changes impacting the capital structure and financial position across the analyzed timeframe.
Cost of Capital
GE Aerospace, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
GE Aerospace, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | 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 | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit shows a significant fluctuation over the observed period. Initially, it was deeply negative at -5,712 million USD in 2020, worsening substantially to -10,802 million USD in 2021. However, in 2022, the negative economic profit decreased to -6,705 million USD, indicating some improvement. Notably, economic profit turned positive in 2023, reaching 2,948 million USD, though it declined again to 1,626 million USD in 2024. The trend suggests an overall recovery from losses to profitability, albeit with some setbacks in the most recent year.
- Invested Capital
- The invested capital exhibits a consistent downward trend throughout the period. It decreased sharply from 117,528 million USD in 2020 to 72,026 million USD in 2021, followed by further declines to 66,842 million USD in 2022 and 50,194 million USD in 2023. By 2024, invested capital had reduced further to 37,678 million USD. This decreasing trend in invested capital may reflect asset divestitures, operational restructuring, or capital efficiency measures.
- Economic Spread Ratio
- The economic spread ratio, which reflects the spread between returns and cost of capital, was negative in the first three years, recording -4.86% in 2020, deepening to -15% in 2021, and slightly improving to -10.03% in 2022. In 2023, it turned positive at 5.87%, indicating that returns finally surpassed the cost of capital, but then declined to 4.31% in 2024. This shift from negative to positive values corresponds with the observed change in economic profit from losses to gains, signaling improved capital efficiency and profitability in recent years.
Economic Profit Margin
GE Aerospace, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales of equipment and services | ||||||
| Add: Increase (decrease) in deferred income | ||||||
| Adjusted sales of equipment and services | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted sales of equipment and services
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reflects significant variations in key performance indicators over a five-year period. The economic profit exhibited notable fluctuations, beginning with a substantial negative value in 2020, worsening markedly in 2021, then improving in 2022, and eventually turning positive in 2023 and 2024. This pattern indicates an initial period of economic losses, followed by a recovery phase leading to profitability in the latter years.
Adjusted sales of equipment and services showed a declining trend overall. After a peak in 2022, there was a considerable decrease in sales volume by 2023, with a sharp drop continuing into 2024. This contraction in sales revenue suggests potential challenges in market demand or product supply affecting the company’s top-line performance during the latter part of the period.
The economic profit margin corresponded closely with the trends observed in economic profit. Margins were negative during the first three years, reaching the lowest point in 2021. However, the margin improved significantly in 2023 and 2024, crossing into positive territory, which aligns with the transition from economic losses to profitability. This change indicates better cost management, pricing strategies, or operational efficiencies contributing to improved economic returns.
- Economic profit
- Started at -5,712 million US dollars in 2020, dropped further to -10,802 million in 2021, recovered to -6,705 million in 2022, then shifted to positive figures of 2,948 million in 2023 and 1,626 million in 2024.
- Adjusted sales of equipment and services
- Reached 73,538 million US dollars in 2020, fluctuated slightly in 2021 and 2022, then decreased considerably to 64,504 million in 2023 and sharply to 35,098 million by 2024.
- Economic profit margin
- Was negative throughout 2020 (-7.77%), 2021 (-15.14%), and 2022 (-9.09%), before improving to positive figures in 2023 (4.57%) and maintaining a positive level in 2024 (4.63%).