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
RTX Corp., 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 annual financial data reveals several important trends regarding profitability, capital efficiency, and economic value creation.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a significant recovery over the analyzed period. It started deeply negative in 2020 at -$1,590 million, then reversed to a positive figure of $5,054 million in 2021. Subsequently, there was a gradual decline in NOPAT through 2022 and 2023, dropping to $4,663 million and $4,118 million respectively. However, in 2024, NOPAT increased again to $6,483 million. Overall, despite fluctuations, the company's operating profitability demonstrated a strong upward trajectory from a loss to a sustainable profit level.
- Cost of Capital
- The cost of capital experienced mild variations throughout the period. It rose moderately from 6.65% in 2020 to a peak of 7.08% in 2024, with intermediate fluctuations. The highest cost of capital was observed in 2024 (7.08%), while the lowest was in 2020 (6.65%). These changes, though not drastic, suggest some increasing pressure on capital costs potentially due to market or risk profile shifts.
- Invested Capital
- Invested capital showed a consistent downward trend, decreasing from $115,597 million in 2020 to $111,328 million in 2024. The reduction was steady year over year, indicating a possible reduction in asset base or capital deployment, which may reflect strategic asset optimization or divestitures.
- Economic Profit
- Despite the recovery in NOPAT, economic profit remained negative in all years, indicating that the returns on invested capital did not exceed the cost of capital consistently. Economic profit improved significantly from a large deficit of -$9,278 million in 2020 to a smaller negative balance of -$1,404 million in 2024. This trend suggests progress toward value creation, although full value generation has not yet been achieved as of the latest period.
In summary, the company has made notable strides in improving operating profitability and reducing its invested capital base, resulting in a narrowed but persistent economic profit deficit. Rising cost of capital ratios may pose challenges, emphasizing the importance of continued efficiency improvements and effective capital allocation to achieve positive economic profit in the future.
Net Operating Profit after Taxes (NOPAT)
RTX Corp., NOPAT calculation
US$ 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 expected credit losses.
3 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to common shareowners.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income (loss) attributable to common shareowners.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
- Net Income (Loss) Attributable to Common Shareowners
- The data reveals a significant turnaround in net income over the five-year span. Starting with a substantial loss of $3,519 million in 2020, the company moved to positive net income in 2021, earning $3,864 million. This positive trajectory continued with net income increasing to $5,197 million in 2022. However, there was a notable decline in 2023, with net income dropping to $3,195 million. The year 2024 saw a substantial recovery, with net income rising again to $4,774 million. Overall, the trend shows strong volatility but an underlying recovery and growth following initial losses.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibits considerable improvement from 2020 through 2024. It started in negative territory at -$1,590 million in 2020, then sharply increased to $5,054 million in 2021. A slight decrease occurred in 2022, with NOPAT falling to $4,663 million, followed by a further decline to $4,118 million in 2023. In 2024, there was a substantial increase to $6,483 million, marking the highest point during the observed period. This suggests strong operating performance recovery and improved profitability post-2020.
- General Observations
- Both net income and NOPAT reveal a pattern of initial recovery after a period of losses, with some fluctuations between 2022 and 2023. The company demonstrates resilience with net income and operating profit growing significantly from 2020 lows to much higher figures by 2024. The decline in 2023 warrants attention as it interrupts the otherwise upward trend, but the subsequent recovery indicates an overall positive financial health trajectory.
Cash Operating Taxes
RTX Corp., cash operating taxes calculation
US$ 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).
- Income Tax Expense
- The income tax expense exhibits variability over the analyzed five-year period. Starting at 575 million US dollars in 2020, it increased notably to 786 million in 2021. However, in 2022, it declined to 700 million before experiencing a further reduction to 456 million in 2023. In 2024, a significant rise to 1181 million occurred, marking the highest level in the period. The fluctuation suggests the influence of changing taxable income, tax rates, or tax planning strategies impacting reported tax expenses.
- Cash Operating Taxes
- Cash operating taxes show a generally upward trend with some volatility. Beginning at 978 million US dollars in 2020, this figure increased to 1158 million in 2021. A sharp and substantial increase to 2635 million is seen in 2022, more than doubling the previous year’s amount. This peak was followed by a considerable decline to 1197 million in 2023. In 2024, cash operating taxes rose again to 1638 million. This pattern indicates significant fluctuations in actual cash tax payments, potentially reflecting changes in tax regulations, timing of tax payments, or differences between accounting tax expense and cash tax outflows.
Invested Capital
RTX Corp., 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 equity equivalents to shareowners’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of marketable securities held in trusts.
- Total Reported Debt & Leases
- The total reported debt and leases remained relatively stable from 2020 through 2022, with values around 33,800 million US dollars. However, a notable increase occurred in 2023, where the amount rose sharply to 45,587 million US dollars. This increase was followed by a slight decline in 2024 to 43,260 million US dollars, yet still remaining substantially higher than the levels observed in the initial years.
- Shareowners’ Equity
- Shareowners’ equity showed a slight upward trend from 2020 to 2021, reaching 73,068 million US dollars. It then experienced a minor decrease in 2022, followed by a significant reduction in 2023 to 59,798 million US dollars. In 2024, the equity levels stabilized modestly with a small increase to 60,156 million US dollars, but overall, the equity remained below the earlier period’s highs.
- Invested Capital
- Invested capital demonstrated a gradual decline over the entire period. From 115,597 million US dollars in 2020, it decreased steadily each year to reach 111,328 million US dollars by 2024. This consistent downward trend suggests a contraction in the company's invested assets or capital base over this timeframe.
Cost of Capital
RTX Corp., 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
RTX Corp., 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 | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin 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 a notable improvement over the five-year period. It increased from a substantial negative value of -9,278 million US dollars in 2020 to -1,404 million US dollars by the end of 2024. This trend indicates a gradual reduction in economic losses, with a significant improvement especially visible after 2021 despite slight fluctuations in 2022 and 2023.
- Invested Capital
-
Invested capital shows a steady but slight decline over the years, decreasing from 115,597 million US dollars in 2020 to 111,328 million US dollars in 2024. This consistent contraction in invested capital suggests careful management of asset base or possible divestments, reflecting a focus on optimizing capital employed in the business.
- Economic Spread Ratio
-
The economic spread ratio remains negative throughout the period, indicating that the company's returns on invested capital have not exceeded its cost of capital. However, there is a marked improvement from -8.03% in 2020 to -1.26% in 2024. Despite remaining below zero, the less negative spread points to an enhanced ability to generate returns relative to capital costs, reducing the economic inefficiency over time.
Economic Profit Margin
RTX Corp., 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 | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin 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 ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reflects several notable trends in the economic profit, net sales, and economic profit margin over the five-year period ending December 31, 2024.
- Net Sales
- Net sales exhibited a steady upward trend throughout the period. Starting at approximately US$56.6 billion in 2020, sales increased each subsequent year, reaching approximately US$80.7 billion in 2024. This consistent growth indicates positive revenue momentum and possibly expanding market demand or improved sales strategies.
- Economic Profit
- Economic profit remained negative for the entire period but showed significant improvement. The largest economic loss occurred in 2020 at roughly -US$9.3 billion. From 2021 onward, economic losses decreased substantially, narrowing to around -US$1.4 billion by the end of 2024. This reduction in negative economic profit suggests ongoing efforts to improve operational efficiency or cost management, though profitability has not yet turned positive.
- Economic Profit Margin
- The economic profit margin was consistently negative, reflecting the ongoing economic losses. However, the margin improved significantly from -16.4% in 2020 to -1.74% in 2024. This decreasing negative margin aligns with the improving economic profit, indicating more effective use of capital relative to sales. Despite the negative margins, the trend points to progressive enhancement in profitability metrics.
Overall, the data illustrates a company with increasing sales revenues and improving economic profitability metrics, although not yet achieving positive economic profit. The consistent narrowing of losses and improvement in economic profit margin suggest constructive adjustments in operations or strategy aimed at enhancing value creation over time.