Economic Value Added (EVA)
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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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Honeywell International Inc. pages available for free this week:
- Cash Flow Statement
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
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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
= – × =
The financial data reveals several notable trends and insights regarding the company's profitability, capital structure, and value creation over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT displays some fluctuations over the years. Starting at $5,376 million in 2020, there was an increase to $5,961 million in 2021, followed by a decline to $5,460 million in 2022. Subsequently, NOPAT rose again to $5,956 million in 2023 and showed a slight increase to $5,978 million in 2024. Overall, the figures indicate a generally stable operating profit with minor volatility.
- Cost of Capital
- The cost of capital demonstrates a gradual increase from 13.34% in 2020 to a peak of 13.66% in 2022. This was followed by a modest decline to 13.54% in 2023 and a further decrease to 12.98% in 2024. The trend suggests a peak in capital costs in the middle of this period, with some relief in more recent years, potentially reflecting changing market conditions or improved capital efficiency.
- Invested Capital
- Invested capital showed a slight declining trend between 2020 and 2022, decreasing from $49,130 million to $47,332 million. It then experienced a minor rebound to $48,147 million in 2023, followed by a significant increase to $60,349 million in 2024. This notable jump in the final year could imply major investments or acquisitions, impacting the capital base substantially.
- Economic Profit
- Economic profit, which measures value creation above the cost of capital, remained negative throughout the period. Starting at -$1,176 million in 2020, there was an improvement to -$511 million in 2021. However, it worsened to -$1,008 million in 2022, improved again to -$561 million in 2023, before declining sharply to -$1,857 million in 2024. Despite some intermittent recovery, the company has consistently failed to generate positive economic profit, indicating that returns on invested capital have not surpassed the cost of capital in any year examined.
In summary, while the company’s operating profit after taxes has remained fairly consistent, increased invested capital and fluctuating cost of capital have led to persistently negative economic profits. The sharp increase in invested capital in the final year, combined with a deepening negative economic profit, may signal challenges in generating sufficient returns from recent investments. Continued monitoring and potentially reassessing capital allocation strategies could be advisable to enhance value creation moving forward.
Net Operating Profit after Taxes (NOPAT)
Honeywell International Inc., NOPAT calculation
US$ 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 exhibits considerable volatility over the analyzed period. The value starts at a significantly negative balance in 2020 (-1176 million USD), improves notably in 2021 (-511 million USD), then deteriorates again in 2022 (-1008 million USD). This negative trend continues with some improvement in 2023 (-561 million USD) before sharply declining to -1857 million USD in 2024, the lowest point in the series. This pattern indicates persistent challenges in generating value above the cost of capital, with substantial weakness in economic profitability especially in the latest year.
- Invested Capital
- Invested capital remains relatively stable from 2020 to 2023, fluctuating around the range of approximately 47,332 to 49,130 million USD. However, a marked increase occurs in 2024, where invested capital rises sharply to 60,349 million USD. This substantial increase may suggest significant new investments or acquisitions. The preceding period shows a slight downward trend, with invested capital marginally declining from 49,130 million USD in 2020 to 47,332 million USD in 2022 before a mild recovery in 2023.
- Economic Spread Ratio
- The economic spread ratio remains consistently negative throughout the entire period, indicating that returns do not cover the cost of capital. Starting at -2.39% in 2020, the ratio improves notably to -1.06% in 2021 but deteriorates again to -2.13% in 2022. It then improves slightly in 2023 to -1.17%, followed by a significant decline to -3.08% in 2024. This pattern reflects fluctuating but persistently unfavorable returns on invested capital relative to its cost, with the lowest performance recorded in the final year.
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
- Adjusted net sales have shown a consistent upward trend over the five-year period, increasing from $33,125 million in 2020 to $38,524 million in 2024. This growth represents a total increase of approximately 16.3%, reflecting steady revenue expansion each year.
- Economic Profit
- Economic profit has remained negative throughout the period, indicating that the company's returns did not exceed its cost of capital. The values fluctuated, with a significant loss of $1,176 million in 2020, a marked improvement to a loss of $511 million in 2021, followed by a deterioration to a loss of $1,008 million in 2022. The loss improved again in 2023 to $561 million before substantially worsening in 2024 to $1,857 million. This pattern suggests volatility in the company’s ability to generate economic value, with the worst performance in 2024.
- Economic Profit Margin
- The economic profit margin, representing economic profit as a percentage of sales, remained negative throughout the period, confirming the consistent economic loss relative to sales. It improved from -3.55% in 2020 to -1.48% in 2021, indicating better efficiency or profitability. However, it deteriorated to -2.81% in 2022, improved slightly to -1.54% in 2023, and then sharply declined to -4.82% in 2024. This volatility aligns with the economic profit trend, with 2024 showing a significant downturn in economic profitability relative to sales.
- Overall Assessment
- While the company has successfully increased its net sales annually, it has struggled to translate higher revenues into positive economic profit. Economic profit margins have remained negative and volatile, with large swings indicating inconsistent cost management or investment returns. The substantial economic loss in 2024 merits particular attention, suggesting a need for strategic review to improve profitability and economic value generation.