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 over the five-year period under review. The net operating profit after taxes (NOPAT) exhibits significant volatility, starting at a positive 6,132 million US dollars in 2020, dropping sharply to a negative 1,820 million in 2021, then recovering to positive figures in subsequent years, reaching a peak of 10,514 million in 2023, before declining to 7,561 million in 2024. This pattern indicates a period of operational challenges followed by a strong recovery and subsequent moderate decline.
The cost of capital shows a consistent upward trend, increasing from 10.1% in 2020 to 15.79% by 2024. This rising cost suggests either an increased risk perception, higher debt costs, or both, which could impact future investment decisions and profitability thresholds.
Invested capital decreases steadily throughout the period, from 117,528 million US dollars in 2020 to 37,678 million in 2024. This reduction could indicate divestitures, asset sales, or operational streamlining efforts aimed at optimizing the capital base and potentially improving capital efficiency.
Economic profit, which measures value creation above the cost of capital, is negative for the first three years, representing losses of 5,734 million, 10,820 million, and 6,722 million respectively. However, it turns positive in 2023 with 2,932 million and remains positive in 2024 at 1,613 million, reflecting a turnaround where returns exceed the cost of capital. This shift aligns with the recovery observed in NOPAT and suggests improved operational performance and capital utilization in later years.
- NOPAT Trend
- Volatile with a significant dip in 2021 followed by a strong rebound in 2023 and slight decline in 2024.
- Cost of Capital
- Gradually increases over the period, indicating rising financing or risk costs.
- Invested Capital
- Consistent reduction year-over-year, suggesting capital base optimization.
- Economic Profit
- Negative in initial years, turning positive in the final two years, indicating improved value creation.
In summary, the data portrays a scenario of initial operational and financial difficulties leading to negative economic profit, followed by recovery efforts that improve profitability and capital efficiency, overcoming the rising cost of capital. The declining invested capital and positive economic profit in recent years contribute to a more favorable financial outlook.
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 exhibited a significant decline from 2020 to 2021, decreasing from -5734 million USD to -10820 million USD, indicating worsening profitability based on capital invested. In 2022, there was an improvement to -6722 million USD, though the figure remained negative. A notable turnaround occurred in 2023 when economic profit shifted to a positive 2932 million USD, indicating value creation. However, in 2024, economic profit decreased again to 1613 million USD, though it remained positive.
- Invested Capital
-
Invested capital showed a continuous decline over the period under review. From 117528 million USD at the end of 2020, the capital base decreased significantly each year, ending with 37678 million USD in 2024. This downward trend suggests a substantial reduction in the assets or capital employed by the company across these years.
- Economic Spread Ratio
-
The economic spread ratio was negative throughout the initial three years, indicating returns below the cost of capital. The ratio worsened sharply from -4.88% in 2020 to -15.02% in 2021, improving moderately to -10.06% in 2022. A positive and substantial improvement was observed in 2023 with a ratio of 5.84%, which decreased slightly to 4.28% in 2024, indicating profitability above the cost of capital during these last two years.
- Overall Insights
-
The data reveals a period of significant challenge up to 2022, characterized by negative economic profit and economic spread ratio, as well as a shrinking invested capital base. The substantial recovery in economic profit and the shift to positive spread ratio in 2023 suggest effective strategic or operational improvements. Despite the decrease in invested capital, the company managed to generate positive economic value in the latter periods, though with some contraction in 2024. The trends indicate a transition from value destruction to value creation with a leaner capital structure.
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 reveals significant fluctuations in the company's economic profit and sales performance over the analyzed period.
- Economic Profit
- The economic profit exhibits a fluctuating but overall volatile trend. Initially, it declined sharply from a negative $5,734 million in 2020 to a larger negative value of $10,820 million in 2021, indicating increasing losses. In 2022, losses narrowed to $6,722 million, showing partial recovery. Notably, in 2023, economic profit turned positive, reaching $2,932 million, and despite a decrease, remained positive at $1,613 million in 2024. This progression suggests a turnaround in profitability beginning in 2023.
- Adjusted Sales of Equipment and Services
- Sales figures show moderate volatility with a downward trend in recent years. Adjusted sales started at $73,538 million in 2020, experienced a slight decrease to $71,356 million in 2021, recovered partially to $73,736 million in 2022, but then notably declined to $64,504 million in 2023 and sharply dropped further to $35,098 million in 2024. The steep decline in sales during the last two years contrasts with the recovery in economic profit, suggesting improved profitability despite lower revenue.
- Economic Profit Margin
- The economic profit margin followed a trajectory consistent with the economic profit figures. It was negative throughout 2020 to 2022, declining from -7.8% in 2020 to its lowest at -15.16% in 2021, then improving to -9.12% in 2022. In 2023 and 2024, the margin turned positive, rising to 4.55% and maintaining a similar level of 4.6%, corroborating the shift toward profitability in these years.
Overall, the data indicates that while the company experienced significant losses through the early years with declining sales volatility, it achieved a positive turnaround in economic profit and margin starting in 2023, despite a sharp decline in sales volume thereafter. This suggests improved operational efficiency or cost management contributing to profitability during periods of reduced sales.