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.
Economic Profit
RTX Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 9,351 – 9.40% × 109,085 = -898
An analysis of the five-year period reveals a consistent negative economic profit, indicating that the net operating profit after taxes (NOPAT) was insufficient to cover the cost of capital charge. Despite this persistent deficit, a significant trend toward recovery is evident, with the economic loss narrowing substantially in the final two years of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced an initial decline, falling from 5,054 million in 2021 to a period low of 4,118 million in 2023. This was followed by a sharp reversal and accelerated growth, with NOPAT increasing to 6,483 million in 2024 and reaching 9,351 million by 2025. This operational recovery is the primary driver behind the improving economic profit trajectory.
- Invested Capital and Cost of Capital
- Invested capital showed a gradual contraction from 111,815 million in 2021 to 107,593 million in 2024, before a slight increase to 109,085 million in 2025. Simultaneously, the cost of capital remained relatively stable, fluctuating within a narrow range between 8.49% and 9.40%. The stability of the cost of capital suggests that the improvement in economic profit is attributable to operational performance rather than a reduction in the weighted average cost of financing.
- Economic Profit Trends
- Economic profit reached its lowest point in 2022 with a deficit of 5,209 million. From 2023 onward, the deficit began to contract, improving to 3,168 million in 2024 and further reducing to 898 million in 2025. The data indicates a strong convergence toward a break-even point, where NOPAT will eventually exceed the capital charge to generate positive economic value added.
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Net Operating Profit after Taxes (NOPAT)
RTX Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to common shareowners.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,052 × 4.30% = 88
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,923 × 21.00% = 404
6 Addition of after taxes interest expense to net income attributable to common shareowners.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 98 × 21.00% = 21
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
Net income attributable to common shareowners and net operating profit after taxes (NOPAT) exhibited distinct performance patterns over the five-year period. While net income demonstrated volatility, NOPAT showed a generally positive trajectory, particularly in the later years.
- Net Income Trend
- Net income attributable to common shareowners increased from US$3,864 million in 2021 to US$5,197 million in 2022, representing a substantial gain. However, this was followed by a decrease to US$3,195 million in 2023. A recovery was observed in 2024, with net income reaching US$4,774 million, and continued growth into 2025, reaching US$6,732 million. This indicates fluctuating profitability for shareowners.
- NOPAT Trend
- NOPAT began at US$5,054 million in 2021, then decreased to US$4,663 million in 2022 and further to US$4,118 million in 2023. A significant increase occurred in 2024, with NOPAT rising to US$6,483 million. This upward trend continued strongly into 2025, reaching US$9,351 million. This suggests improving operational efficiency and profitability, independent of capital structure and taxes.
- Relationship between Net Income and NOPAT
- While both metrics moved in the same general direction (increasing in 2022 and 2025), the magnitude of change differed. The decline in 2023 was more pronounced for net income than for NOPAT. Furthermore, the substantial increase in NOPAT in 2024 and 2025 was greater than the corresponding increase in net income, suggesting potential changes in financing costs or tax rates impacting the bottom line.
- Overall Assessment
- The observed trends suggest a strengthening of core operational profitability, as evidenced by the NOPAT figures. Despite fluctuations in net income, the consistent growth in NOPAT over the latter part of the period indicates improved underlying business performance. Further investigation into the factors driving the divergence between net income and NOPAT would be beneficial.
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Cash Operating Taxes
RTX Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The reported income tax expense demonstrates volatility over the five-year period. Initial values decreased significantly between 2021 and 2023, followed by substantial increases in 2024 and 2025. Conversely, cash operating taxes exhibited a different pattern, with a large increase in 2022, followed by a decrease in 2023, and then a moderate increase through 2024 before declining slightly in 2025.
- Income Tax Expense Trend
- Income tax expense began at US$786 million in 2021, decreasing to US$700 million in 2022, and then falling considerably to US$456 million in 2023. A significant rise occurred in 2024, reaching US$1,181 million, and continued upward to US$1,664 million in 2025. This indicates increasing tax obligations in the latter part of the period.
- Cash Operating Taxes Trend
- Cash operating taxes started at US$1,158 million in 2021, then increased substantially to US$2,635 million in 2022. This was followed by a decrease to US$1,197 million in 2023. Values then rose to US$1,638 million in 2024, before decreasing slightly to US$1,258 million in 2025. The 2022 peak suggests a potentially large, temporary tax payment or a change in tax regulations impacting cash flow.
- Relationship Between Income Tax Expense and Cash Operating Taxes
- A divergence is apparent between income tax expense and cash operating taxes. While income tax expense decreased from 2021 to 2023, cash operating taxes initially increased and then decreased. This suggests timing differences between when taxes are recognized for accounting purposes (income tax expense) and when cash is actually paid (cash operating taxes). The increasing income tax expense in 2024 and 2025 does not directly correlate with the cash operating taxes, which plateaued and then slightly decreased, indicating a potential build-up of deferred tax liabilities or assets.
The fluctuations in both metrics warrant further investigation to understand the underlying drivers, including changes in tax laws, profitability, and the utilization of tax credits or loss carryforwards. The difference between the two figures suggests a significant impact from non-cash tax items.
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Invested Capital
RTX Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
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 equity equivalents to shareowners’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of assets under construction.
7 Subtraction of marketable securities held in trusts.
The composition of invested capital at RTX Corp. exhibits fluctuations over the five-year period. Total reported debt & leases and shareowners’ equity are the components used to derive invested capital, and their individual trends contribute to the observed patterns.
- Invested Capital Trend
- Invested capital decreased from US$111,815 million in 2021 to US$109,971 million in 2022, representing a decline of approximately 1.7%. A further decrease was noted in 2023, falling to US$108,443 million. 2024 saw a slight reduction to US$107,593 million. However, 2025 witnessed a modest increase, with invested capital rising to US$109,085 million. Overall, the trend suggests relative stability with a slight downward trajectory, followed by a minor recovery in the most recent year.
- Debt & Leases
- Total reported debt & leases increased from US$33,553 million in 2021 to US$33,856 million in 2022, a minor increase. A substantial rise occurred in 2023, reaching US$45,587 million. This was followed by a decrease in 2024 to US$43,260 million, and a further reduction in 2025 to US$39,956 million. The significant increase in 2023, followed by subsequent declines, suggests potential shifts in financing strategies or capital structure adjustments.
- Shareowners’ Equity
- Shareowners’ equity experienced a slight decrease from US$73,068 million in 2021 to US$72,632 million in 2022. A more pronounced decline was observed in 2023, falling to US$59,798 million. A small increase occurred in 2024, reaching US$60,156 million, and a further increase was seen in 2025, with equity rising to US$65,245 million. The decrease in shareowners’ equity, particularly in 2023, may be attributable to factors such as share repurchases, dividend payments, or retained earnings performance.
The interplay between debt & leases and shareowners’ equity shapes the overall invested capital figure. The decrease in invested capital between 2021 and 2024 appears to be driven by a combination of decreasing equity and fluctuating debt levels. The slight increase in invested capital in 2025 is likely due to the combined effect of increased equity and decreased debt.
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Cost of Capital
RTX Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 266,659) | 266,659) | ÷ | 304,721) | = | 0.88 | 0.88 | × | 10.23% | = | 8.95% | ||
| Debt3 | 36,010) | 36,010) | ÷ | 304,721) | = | 0.12 | 0.12 | × | 4.50% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 2,052) | 2,052) | ÷ | 304,721) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 304,721) | 1.00 | 9.40% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 173,069) | 173,069) | ÷ | 213,294) | = | 0.81 | 0.81 | × | 10.23% | = | 8.30% | ||
| Debt3 | 38,226) | 38,226) | ÷ | 213,294) | = | 0.18 | 0.18 | × | 4.50% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 1,999) | 1,999) | ÷ | 213,294) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 213,294) | 1.00 | 8.97% | ||||||||||
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 | 122,387) | 122,387) | ÷ | 166,026) | = | 0.74 | 0.74 | × | 10.23% | = | 7.54% | ||
| Debt3 | 41,879) | 41,879) | ÷ | 166,026) | = | 0.25 | 0.25 | × | 4.60% × (1 – 21.00%) | = | 0.92% | ||
| Operating lease liability4 | 1,760) | 1,760) | ÷ | 166,026) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 166,026) | 1.00 | 8.49% | ||||||||||
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 | 143,375) | 143,375) | ÷ | 174,079) | = | 0.82 | 0.82 | × | 10.23% | = | 8.43% | ||
| Debt3 | 28,762) | 28,762) | ÷ | 174,079) | = | 0.17 | 0.17 | × | 4.00% × (1 – 21.00%) | = | 0.52% | ||
| Operating lease liability4 | 1,942) | 1,942) | ÷ | 174,079) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 174,079) | 1.00 | 8.98% | ||||||||||
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 | 142,174) | 142,174) | ÷ | 180,305) | = | 0.79 | 0.79 | × | 10.23% | = | 8.07% | ||
| Debt3 | 36,063) | 36,063) | ÷ | 180,305) | = | 0.20 | 0.20 | × | 4.00% × (1 – 21.00%) | = | 0.63% | ||
| Operating lease liability4 | 2,068) | 2,068) | ÷ | 180,305) | = | 0.01 | 0.01 | × | 2.80% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 180,305) | 1.00 | 8.72% | ||||||||||
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 »
Economic Spread Ratio
RTX Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (898) | (3,168) | (5,086) | (5,209) | (4,701) | |
| Invested capital2 | 109,085) | 107,593) | 108,443) | 109,971) | 111,815) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -0.82% | -2.94% | -4.69% | -4.74% | -4.20% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -5.82% | -35.12% | -15.06% | -20.44% | -19.05% | |
| Caterpillar Inc. | -6.93% | -2.36% | -2.42% | -6.34% | -5.74% | |
| Eaton Corp. plc | -5.09% | -6.26% | -7.84% | -9.74% | -9.35% | |
| GE Aerospace | 3.24% | -0.64% | 1.18% | -13.77% | -18.68% | |
| Honeywell International Inc. | -4.94% | -3.97% | -2.12% | -3.10% | -2.01% | |
| Lockheed Martin Corp. | 12.79% | 11.78% | 18.22% | 14.24% | 15.22% | |
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -898 ÷ 109,085 = -0.82%
4 Click competitor name to see calculations.
An analysis of the economic value metrics reveals a consistent recovery trend from 2022 through 2025. While the company continued to operate with a negative economic profit throughout the period, there is a marked reduction in the scale of these losses, indicating a progressive improvement in the ability to generate returns relative to the cost of capital.
- Economic Profit Trend
- Economic profit reached its lowest point in 2022 at -5,209 million USD. Following this trough, a steady recovery is observed, with losses narrowing to -5,086 million USD in 2023, -3,168 million USD in 2024, and reaching -898 million USD by 2025. This represents a significant reduction in economic value destruction over the four-year period.
- Invested Capital Stability
- Invested capital remained relatively stable, exhibiting a slight downward trend from 111,815 million USD in 2021 to a minimum of 107,593 million USD in 2024, before slightly increasing to 109,085 million USD in 2025. The relative constancy of the capital base suggests that the improvement in economic profit is driven by operational gains rather than a strategic reduction in invested assets.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the trend seen in economic profit, moving from -4.20% in 2021 to a low of -4.74% in 2022, and subsequently recovering to -0.82% by 2025. The upward trajectory of this ratio indicates that the gap between the return on invested capital and the cost of capital is narrowing, bringing the company closer to a break-even point in terms of economic value creation.
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Economic Profit Margin
RTX Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (898) | (3,168) | (5,086) | (5,209) | (4,701) | |
| Net sales | 88,603) | 80,738) | 68,920) | 67,074) | 64,388) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.01% | -3.92% | -7.38% | -7.77% | -7.30% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -3.49% | -26.54% | -8.69% | -15.61% | -15.13% | |
| Caterpillar Inc. | -7.00% | -2.21% | -2.10% | -6.14% | -6.62% | |
| Eaton Corp. plc | -6.40% | -8.04% | -10.62% | -14.45% | -14.04% | |
| GE Aerospace | 2.96% | -0.69% | 0.92% | -12.48% | -18.85% | |
| Honeywell International Inc. | -8.03% | -6.23% | -2.80% | -4.09% | -2.80% | |
| Lockheed Martin Corp. | 5.17% | 4.77% | 7.40% | 5.74% | 6.50% | |
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -898 ÷ 88,603 = -1.01%
3 Click competitor name to see calculations.
Between 2021 and 2025, a consistent trend of recovery in economic performance is observed. While the company maintained a negative economic profit throughout the analyzed period, there is a clear trajectory toward value creation, characterized by a significant reduction in economic losses coinciding with steady growth in net sales.
- Net Sales Trajectory
- Net sales exhibited uninterrupted growth over the five-year period, increasing from 64,388 million US dollars in 2021 to 88,603 million US dollars by 2025. The most significant acceleration in revenue occurred between 2023 and 2025, indicating a substantial expansion of the top-line operational scale.
- Economic Profit Trends
- Economic profit remained negative for the duration of the period, signaling that the returns generated were insufficient to cover the company's cost of capital. Losses deepened from 4,701 million US dollars in 2021 to a peak of 5,209 million US dollars in 2022. However, a strong recovery phase followed, with losses narrowing to 3,168 million US dollars in 2024 and further decreasing to 898 million US dollars by the end of 2025.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrored the absolute economic profit trends. After reaching a minimum of -7.77% in 2022, the margin began a steady ascent. A notable improvement was recorded in 2024 as the margin rose to -3.92%, eventually reaching -1.01% in 2025. This progression indicates that the company is rapidly approaching the break-even point where it begins to generate positive economic value added.
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