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
Honeywell International Inc., 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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes experienced fluctuations over the five-year period. It increased from 5376 million in 2020 to a peak of 5961 million in 2021. This was followed by a decline to 5460 million in 2022. Subsequently, NOPAT rose again to 5956 million in 2023 and slightly increased to 5978 million in 2024. Overall, the trend indicates moderate growth with some volatility.
- Cost of Capital
- The cost of capital showed a generally stable pattern with minor variations. It started at 13.35% in 2020, gradually increased to 13.67% in 2022, and then slightly decreased to 12.99% in 2024. The gradual decline toward the end of the period may suggest improved capital efficiency or lower risk perception.
- Invested Capital
- Invested capital demonstrated a downward trend from 49130 million in 2020 to 47332 million in 2022, reflecting a reduction in the asset base or capital employed. However, it rebounded to 48147 million in 2023 and significantly increased to 60349 million in 2024. This sharp rise in 2024 may indicate substantial investment activities or acquisitions in the latest year.
- Economic Profit
- Economic profit remained negative throughout the observed period, indicating that the company consistently failed to generate returns above the cost of capital. The loss narrowed from -1181 million in 2020 to -516 million in 2021 but widened again to -1012 million in 2022. It improved to -566 million in 2023 but then deteriorated markedly to -1862 million in 2024. This suggests increasing challenges in value creation, especially in the most recent year despite higher NOPAT and invested capital.
Net Operating Profit after Taxes (NOPAT)
Honeywell International Inc., 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 allowances.
3 Addition of increase (decrease) in customer advances and deferred income.
4 Addition of increase (decrease) in obligations for product warranties and product performance guarantees.
5 Addition of increase (decrease) in repositioning reserves.
6 Addition of increase (decrease) in equity equivalents to net income attributable to Honeywell.
7 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2024 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income attributable to Honeywell.
10 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
The financial data reveals the following trends for the analyzed period:
- Net Income Attributable
- The net income attributable to the entity showed a positive growth trend overall. Starting from approximately $4,779 million at the end of 2020, it increased to $5,542 million in 2021, reflecting a strong upward movement. However, there was a decline in 2022 to about $4,966 million, indicating a possible short-term setback or increased costs impacting profitability. The amount rebounded in 2023, reaching $5,658 million, and continued a slight increase into 2024, ending at $5,705 million. This pattern suggests resilience and recovery after the dip in 2022, with sustained profitability gains in the subsequent years.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT figures display a somewhat similar pattern to net income but overall maintain higher absolute values. The measure rose from $5,376 million in 2020 to $5,961 million in 2021, showing improvement in operations after tax considerations. A decrease occurred in 2022 to $5,460 million, mirroring the net income dip but with a less pronounced decline percentage-wise. Subsequently, NOPAT increased again to $5,956 million in 2023 and remained relatively stable into 2024 at $5,978 million. This trend indicates operational efficiency and effective tax management despite fluctuations, contributing to a steady NOPAT performance post-2022.
Overall, the data points to a company experiencing growth after 2020, facing a temporary decrease in 2022 in both net income and NOPAT, and then recovering with stable or increasing profitability through 2023 and 2024. The recovery phase suggests effective management responses to prior challenges, with consistent operational profit maintenance after tax effects considered.
Cash Operating Taxes
Honeywell International Inc., cash operating taxes calculation
US$ 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 analysis of the financial data reveals a fluctuating trend in tax-related expenses over the five-year period from 2020 to 2024.
- Tax Expense
- This item shows variability, with an initial increase from 1147 million US dollars in 2020 to a peak of 1625 million in 2021. Afterward, there was a decline to 1412 million in 2022, followed by a modest increase to 1487 million in 2023 and a slight decrease to 1473 million in 2024. Overall, the tax expense exhibits moderate fluctuations without a clear linear trend, suggesting changes in taxable income, tax rates, or tax planning strategies may have impacted this item.
- Cash Operating Taxes
- Cash operating taxes display a somewhat different pattern, with an increase from 1380 million in 2020 to a higher level of 1503 million in 2021. A further rise is noted in 2022 to 1654 million, followed by a decline to 1434 million in 2023. However, 2024 shows a significant increase to 1847 million, which is the highest value in the period analyzed. This suggests increased cash tax payments in the latest year, potentially due to changes in taxable income recognition, tax prepayments, or adjustments of prior tax obligations.
Comparing the two metrics, cash operating taxes consistently remain above the reported tax expense for most years, with the gap widening notably in 2024. This divergence may indicate timing differences between tax expense recognition in financial statements and actual cash tax outflows. The variability and the recent increase in cash operating taxes could signal changes in tax policy, effective tax rates, or operational results impacting tax liabilities.
Invested Capital
Honeywell International Inc., 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 customer advances and deferred income.
5 Addition of obligations for product warranties and product performance guarantees.
6 Addition of repositioning reserves.
7 Addition of equity equivalents to total Honeywell shareowners’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
10 Subtraction of available for sale investments.
The annual financial data reflects several significant trends concerning the company's debt levels, equity position, and overall invested capital.
- Total reported debt & leases
- There is a noticeable fluctuation in the total reported debt and leases over the five-year period. Starting from a relatively high level of 23,212 million USD at the end of 2020, the debt decreased to approximately 20,631 million USD in 2021 and remained fairly stable through 2022 at 20,537 million USD. In 2023, a slight increase to 21,536 million USD is observed. However, by the end of 2024, the debt surged markedly to 32,225 million USD, which represents a significant rise compared to previous years, indicating potential changes in financing strategy or increased borrowing.
- Total Honeywell shareowners’ equity
- The company's shareholders’ equity shows a more volatile but overall stable pattern. It initially increased from 17,549 million USD in 2020 to a peak of 18,569 million USD in 2021, followed by a decline to 16,697 million USD in 2022, and further down to a low of 15,856 million USD in 2023. By the end of 2024, equity recovered somewhat to 18,619 million USD, slightly surpassing the earlier peak. This fluctuation suggests periods of either retained earnings variation or equity adjustments, potentially influenced by market conditions and company performance.
- Invested capital
- The invested capital shows a gradual downward trend from 49,130 million USD in 2020 to a low of 47,332 million USD in 2022. It then moderately rebounds to 48,147 million USD in 2023 before exhibiting a substantial increase to 60,349 million USD in 2024. The sharp rise in invested capital in the final year correlates with the marked increase in debt, which may suggest the company has undertaken major investments financed predominantly through increased borrowing.
In summary, the data reveals that the company maintained relatively stable debt and equity figures between 2020 and 2023, with minor fluctuations. However, the year 2024 shows a pronounced increase in debt alongside a significant expansion in invested capital and a rebound in shareholder equity. These patterns may reflect strategic initiatives involving large-scale investments and changes in capital structure, indicating a more aggressive financial posture in the most recent year.
Cost of Capital
Honeywell International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Honeywell International Inc., 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 | ||||||
| GE Aerospace | ||||||
| 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 has shown considerable fluctuations over the five-year period. Beginning with a substantial negative value of -1181 million US dollars in 2020, it improved to -516 million in 2021. However, it deteriorated again to -1012 million in 2022, before some improvement in 2023 to -566 million. In 2024, the economic profit sharply reduced further to -1862 million, indicating increasing losses in terms of economic profit in the latest year.
- Invested Capital
- Invested capital demonstrated a generally stable trend between 2020 and 2023, with values fluctuating slightly around the 47,000 to 49,000 million US dollars range. The figures were 49,130 million in 2020, then slightly decreasing to 48,349 million in 2021, and further to 47,332 million in 2022. It rose marginally to 48,147 million in 2023 before experiencing a significant increase to 60,349 million in 2024, suggesting considerable additional capital investment or asset base expansion in that year.
- Economic Spread Ratio
- The economic spread ratio, reflecting the return spread over the cost of capital, remained negative throughout the analyzed period. It improved from -2.4% in 2020 to -1.07% in 2021, signaling a reduction in economic losses relative to invested capital. However, the spread worsened again to -2.14% in 2022, followed by a smaller loss at -1.17% in 2023. In 2024, the ratio deteriorated sharply to -3.09%, marking the lowest performance within the timeframe and aligning with the significant economic profit decline observed during the same year.
- Overall Insights
- The data depicts a fluctuating financial performance, with economic profit and spread ratio indicating persistent challenges in generating returns above the cost of capital. Despite stable invested capital for most years, there is a notable increase in capital investment in 2024. This increase in investment coincides with a deterioration in both economic profit and economic spread, suggesting that the additional capital was not yet resulting in improved profitability. The recurring negative economic profit and spread highlight ongoing operational or market-related pressures affecting value creation.
Economic Profit Margin
Honeywell International Inc., 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 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in customer advances and deferred income | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| 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 net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Net Sales
- The adjusted net sales exhibit a consistent upward trajectory over the analyzed periods. Starting from approximately 33,125 million US dollars, there is a steady increase each year, culminating in 38,524 million US dollars by the end of the latest period. This indicates a growth trend in revenue generation, reflecting expansion or improved sales performance.
- Economic Profit
- Economic profit figures remain negative throughout the entire timeline, signalling the company has not achieved economic profitability in these years. The values fluctuate significantly, with an initial economic loss of 1,181 million US dollars which improves considerably in the second period to a loss of 516 million US dollars. However, this improvement is not sustained, as economic profit worsens again in the third period to a loss of 1,012 million US dollars, improves slightly in the fourth year to a loss of 566 million, but then deteriorates sharply to a loss of 1,862 million US dollars in the final year. This volatility suggests challenges in controlling costs or generating returns above the cost of capital despite growing sales.
- Economic Profit Margin
- The economic profit margin parallels the economic profit trends, remaining negative across all periods, which is consistent with an overall economic loss. Initially, the margin improves from -3.56% to -1.49%, indicating a reduction in losses relative to sales. However, this positive trend is interrupted with declines leading to margins of -2.82%, then a slight improvement to -1.55%, before sharply deteriorating to -4.83% in the latest period. These fluctuations suggest variable efficiency in generating returns from sales, with the latest period representing the poorest performance in terms of economic profitability relative to sales.
- Summary of Trends
- Despite steady growth in adjusted net sales, the company has struggled to convert sales growth into positive economic profit, with consistent losses and significant volatility over the years. The economic profit margin negatively mirrors this instability, showing a cyclical pattern of improvement and decline, and ultimately recording the lowest margin in the latest period. This pattern highlights ongoing challenges in cost management or capital utilization efficiency that overshadow revenue gains.