GE Aerospace (NYSE:GE)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited significant volatility over the analyzed periods. A positive value was recorded initially, followed by a considerable decline into negative territory in the subsequent year. This was succeeded by a recovery phase with profits turning positive and reaching a notable peak before slightly decreasing in the most recent period. This pattern suggests fluctuating operational efficiency and profitability over time.

Cost of Capital

The cost of capital demonstrated a consistent upward trend throughout the observed years. Starting from just above 10%, it rose steadily to nearly 16% by the final period. This increase indicates a rising expense required to finance the company's operations and investments, which may impact overall investment decisions and valuation assessments.

Invested Capital

Invested capital showed a continuous and significant decline over the periods. The reduction from over 117 billion US dollars to under 38 billion US dollars suggests substantial divestment, asset sales, or adjustments in capital allocation. This decrease might reflect strategic shifts, efficiency improvements, or efforts to streamline operations.

Economic Profit

Economic profit remained negative in the earlier years, with an intensification of losses before improving to positive territory in more recent periods. The attainment of positive economic profit in the latter years indicates that the returns on invested capital eventually exceeded the cost of capital, reflecting enhanced value creation despite earlier challenges.

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.

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.

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.

Economic Profit

The economic profit shows significant fluctuations over the five-year period. Initially, there is a sizable negative economic profit of -5755 million US dollars in 2020, which worsens considerably to -10837 million US dollars in 2021. This negative trend improves markedly in 2022, with the loss reducing to -6738 million US dollars. The company then reverses this trend by generating a positive economic profit of 2917 million US dollars in 2023, followed by a decrease to 1601 million US dollars in 2024. Overall, the data indicates a severe shock or downturn in 2021, followed by a recovery phase resulting in positive economic profit in the subsequent two years, albeit with a lower figure in 2024 compared to 2023.

Invested Capital

The invested capital displays a consistent and notable decline throughout the observed period. Starting at 117,528 million US dollars in 2020, it decreases sharply to 72,026 million US dollars in 2021, followed by a gradual reduction to 66,842 million in 2022, then further down to 50,194 million in 2023, and reaching 37,678 million in 2024. This continuous decrease suggests a strategic reduction in capital investment, asset divestitures, or operational downsizing, leading to a much smaller capital base by the end of the period.

Economic Spread Ratio

The economic spread ratio exhibits negative values in the first three years, starting at -4.9% in 2020 and worsening to -15.05% in 2021. It improves to -10.08% in 2022, followed by a sharp reversal to positive territory at 5.81% in 2023 and slightly declining to 4.25% in 2024. The negative spread ratio in the initial years aligns with the negative economic profit, indicating returns below the cost of capital during that time. The transition to positive values in 2023 and 2024 reflects improved profitability relative to capital costs, coinciding with the positive economic profit during those years.

Summary of Trends

The overall pattern reveals a period of financial difficulty and value erosion between 2020 and 2022, characterized by negative economic profits, a contracting capital base, and negative economic spreads. Beginning in 2023, the company’s financial performance improves substantially, achieving positive economic profit and economic spread while continuing to reduce invested capital. This suggests a focus on enhancing capital efficiency and profitability, possibly through restructuring or optimization efforts. The decline in economic profit in 2024 compared to 2023, despite the positive levels, could indicate emerging challenges or a normalization after a strong recovery year.

Economic Profit

The economic profit experienced significant fluctuations over the analyzed periods. Initially, there was a substantial negative value of -5755 million US dollars, which worsened considerably to -10837 million in the following year. In the subsequent year, there was an improvement, with the loss narrowing to -6738 million. A positive turnaround occurred by the fourth period, showing a profit of 2917 million, followed by a slight reduction to 1601 million in the final period. This indicates a recovery phase after prolonged losses, although the latest figure suggests some moderation in economic profit.

Adjusted Sales of Equipment and Services

Adjusted sales figures demonstrated a declining trend overall. Starting at 73538 million US dollars, the sales slightly decreased to 71356 million in the next year before increasing mildly to 73736 million. However, the trend reversed more sharply thereafter, declining to 64504 million and then nearly halving to 35098 million by the end of the final period. This consistent decrease in sales points toward weakening market demand or challenges in the company's sales operations.

Economic Profit Margin

The economic profit margin reflects similar variability to economic profit. It was negative at -7.83% initially, dropping further to -15.19%, indicating deteriorating profitability relative to sales. The margin improved to -9.14% thereafter, transitioning into positive territory at 4.52% and remaining fairly stable at 4.56% in the final period. This suggests the company managed to improve its cost efficiency or pricing strategy, ultimately shifting from losses to gains relative to its sales base.