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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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 data reveals notable fluctuations and trends in profitability, capital efficiency, and economic value over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT experienced significant volatility. Starting from a positive value of approximately $6.1 billion in 2020, it sharply declined to a negative figure in 2021, indicating an operational loss. This was followed by a recovery, with positive but fluctuating NOPAT values in subsequent years, peaking at over $10.5 billion in 2023 before declining to around $7.6 billion in 2024. This pattern indicates challenges in maintaining consistent profitability, though the company managed to regain positive operating earnings after the downturn.
- Cost of Capital
- The cost of capital displayed an upward trend throughout the period. Beginning at about 10.08% in 2020, it increased steadily each year to reach 15.75% in 2024. This rising trend suggests increasing financing costs or perceived risk associated with the company's capital structure, potentially impacting investment decisions and valuation.
- Invested Capital
- There was a consistent and pronounced decline in invested capital over the years, decreasing from approximately $117.5 billion in 2020 to about $37.7 billion in 2024. This significant reduction indicates a possible divestment of assets, operational downsizing, or an effort to improve capital efficiency by reducing the capital base.
- Economic Profit
- Economic profit remained negative during the first three years, signifying that the company's returns did not exceed its cost of capital in those periods. Despite growing net operating profit after taxes in later years, economic profit turned positive only in 2023 and 2024, with values of approximately $2.9 billion and $1.6 billion, respectively. This shift reflects improved value creation and operational efficiency, although the margin decreased from 2023 to 2024, corresponding with the decline in NOPAT and the increased cost of capital.
Overall, the data suggests that the company faced significant operational challenges around 2021 but managed to recover profitability subsequently. However, the increasing cost of capital and decreasing invested capital present both risks and opportunities related to capital allocation and financing. The improvement in economic profit in the last two years indicates enhanced value generation which, if sustained, can contribute to long-term financial health.
Net Operating Profit after Taxes (NOPAT)
GE Aerospace, NOPAT calculation
US$ 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.
The financial data indicate notable shifts over the five-year period in the key metrics analyzed. Initially, the economic profit reveals a substantial negative figure which worsens from 2020 through 2021, signaling declining profitability or economic losses. However, from 2022 onwards, there is a marked improvement in economic profit, turning positive in 2023 and maintaining positivity into 2024, albeit with a decrease in the latter year compared to 2023.
Invested capital demonstrates a consistent and significant downward trend throughout the period, decreasing almost continuously year over year. This reduction suggests ongoing divestment or capital optimization efforts, with the amount of invested capital dropping from over 117 billion US dollars in 2020 to below 38 billion US dollars by 2024. Such a decrease may impact the scale of operations or be part of a strategic restructuring.
The economic spread ratio, which measures the spread between the return on invested capital and the cost of capital, exhibits a parallel trend with economic profit. It is negative at the start and worsens through 2021, implying that the returns generated were below the cost of capital, indicating value destruction. From 2022, the ratio improves significantly and becomes positive in 2023 and 2024, reflecting a recovery phase where returns have exceeded the cost of capital, thereby creating value. Nevertheless, the ratio decreases slightly between 2023 and 2024, suggesting some moderation in economic efficiency gains.
Overall, the data portray a cycle of restructuring or recovery, with initial economic challenges reflected in negative profits and spreads, followed by a stabilization and recovery period where profitability and capital efficiency improve substantially. The reduction in invested capital alongside improving economic profit and spread suggests a more efficient use of capital in the latter years.
- Economic Profit
- Significantly negative in 2020 and 2021, improving in 2022, and turning positive in 2023 and 2024.
- Invested Capital
- Steadily declining from 2020 to 2024, indicating capital reduction or reallocation.
- Economic Spread Ratio
- Negative and worsening through 2021, improving and becoming positive in 2023 and 2024, signaling improved value creation.
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.
- Economic Profit
- The economic profit exhibited considerable volatility over the analyzed period. Initially, the figure was negative, indicating losses, with a value of -5710 million in 2020, which worsened sharply to -10801 million in 2021. In 2022, the loss narrowed to -6704 million, showing an improvement. Notably, in 2023, the economic profit turned positive, reaching 2949 million, suggesting a significant turnaround. However, the value slightly declined in 2024 to 1627 million, though it remained positive.
- Adjusted Sales of Equipment and Services
- The adjusted sales value showed a downward trend over the years. Starting at 73538 million in 2020, it slightly decreased to 71356 million in 2021, then increased slightly to 73736 million in 2022. Subsequently, there was a pronounced decline in sales to 64504 million in 2023, followed by a more than 45% drop to 35098 million in 2024, indicating a significant reduction in sales volume or pricing.
- Economic Profit Margin
- The economic profit margin mirrored the economic profit trend, beginning in negative territory. It deteriorated from -7.77% in 2020 to -15.14% in 2021, indicating increased inefficiency or cost pressures relative to sales. In 2022, the margin improved to -9.09%, reflecting some recovery. The margin then shifted to positive territory in 2023 with 4.57%, maintaining a similar level at 4.63% in 2024, signifying enhanced profitability despite lower sales.