Thermo Fisher Scientific Inc. (NYSE:TMO)

Net Operating Profit After Taxes (NOPAT)

The NOPAT showed an initial increase from 6,545 million US dollars in 2020 to 7,465 million in 2021. However, it declined significantly in the following years to 6,425 million in 2022 and further down to 5,117 million in 2023. A slight recovery is noted in 2024, with NOPAT rising to 5,400 million.

Cost of Capital

The cost of capital remained relatively stable over the period, fluctuating marginally between 10.8% and 11.19%. It started at 11.19% in 2020, dipped slightly to 10.8% in 2021, and then increased again to hover around 11.07% to 11.17% from 2022 to 2024.

Invested Capital

Invested capital showed a consistent upward trend from 61,158 million US dollars in 2020 to a peak of 85,573 million in 2023. Thereafter, a decrease occurred in 2024, dropping to 82,071 million, which, however, remains significantly higher than the initial level in 2020.

Economic Profit

Economic profit was negative throughout the period and showed a worsening trend. Starting at -297 million US dollars in 2020, it declined sharply to -1,149 million in 2021 and then further deteriorated to -2,744 million in 2022. The negative trend continued with economic profit reaching -4,354 million in 2023, improving slightly to -3,764 million in 2024 but still indicating significant value destruction.

Summary Insights

The company experienced a declining operational profitability after 2021, reflected in falling NOPAT values through 2023 with a modest rebound in 2024. Despite a stable cost of capital, the invested capital steadily increased until 2023 before a moderate reduction in 2024. The persistent negative economic profit, worsening especially from 2021 to 2023, suggests that returns generated were insufficient to cover the cost of capital throughout the analyzed period. Although economic profit improved somewhat in 2024, the firm continued to destroy value, indicating challenges in generating returns above capital costs despite increased investment levels.

Net Income Attributable to Thermo Fisher Scientific Inc.

The net income shows an overall fluctuating trend during the analyzed period. It increased significantly from 6375 million US dollars in 2020 to a peak of 7725 million US dollars in 2021. However, this was followed by a decline over the next two years, reaching 5995 million US dollars in 2023. A modest recovery is observed in 2024, with net income rising to 6335 million US dollars, though it remains below the 2021 peak.

Net Operating Profit After Taxes (NOPAT)

The NOPAT values illustrate a pattern consistent with net income, with initial growth from 6545 million US dollars in 2020 to 7465 million US dollars in 2021. Subsequently, there is a notable decrease to 6425 million US dollars in 2022, followed by a sharper decline to 5117 million US dollars in 2023. A recovery phase occurs in 2024, where NOPAT increases to 5400 million US dollars, yet it still remains considerably lower than the earlier years.

Summary of Trends

The financial performance, as measured by both net income and NOPAT, peaked in 2021 and then experienced a downward adjustment for two consecutive years. Despite some recovery in 2024, neither metric returned to the highs seen in 2021. This pattern suggests a period of robust profitability followed by challenges that impacted the company’s earnings and operating efficiency, with partial improvement toward the end of the period.

The financial data reveals notable fluctuations in tax-related expenses over the five-year period ending in 2024. Two key categories, provision for income taxes and cash operating taxes, demonstrate distinct trends.

Provision for Income Taxes

The provision for income taxes exhibits significant volatility. Starting at 850 million USD in 2020, it increased sharply to 1,109 million USD in 2021. However, in 2022, the provision decreased substantially to 703 million USD, followed by a further decline to 284 million USD in 2023. A notable rebound occurs in 2024, with the provision rising again to 657 million USD. This pattern suggests variability in the company's tax liabilities or effective tax rate, possibly influenced by changes in pre-tax earnings, tax regulations, or one-time adjustments.

Cash Operating Taxes

Cash operating taxes show a generally upward trend with some minor fluctuations. Beginning at 1,227 million USD in 2020, these taxes increased substantially to 1,866 million USD in 2021. The level then remained relatively stable through 2022 at 1,806 million USD and slightly decreased to 1,701 million USD in 2023. In 2024, cash operating taxes resumed growth, reaching 1,946 million USD, the highest in the observed period. This steady increase indicates rising cash outflows for tax payments, which may reflect higher taxable income, changes in tax rates, or both.

In summary, while cash operating taxes demonstrate a mostly consistent upward trajectory, the provision for income taxes is marked by pronounced variability. The divergence in trends between these two items could imply timing differences between tax expenses recorded and actual cash paid or adjustments related to deferred taxes or tax planning strategies.

Total Reported Debt & Leases

The total reported debt and leases showed a significant increase from 22,545 million USD at the end of 2020 to 36,339 million USD in 2021. Subsequently, it remained relatively stable, with slight fluctuations around the 36,000 million USD mark through 2023, before decreasing to 32,775 million USD by the end of 2024. This pattern suggests a major debt acquisition or lease increase occurred between 2020 and 2021, followed by stabilization and moderate deleveraging in the final year observed.

Total Shareholders’ Equity

Shareholders’ equity demonstrated a consistent upward trend throughout the period, increasing from 34,507 million USD in 2020 to 49,584 million USD in 2024. The growth rate appears steady year-over-year, indicating sustained value creation and possible retained earnings or capital injections contributing to strengthening the equity base.

Invested Capital

Invested capital experienced a marked increase from 61,158 million USD at the end of 2020 to a peak of 85,573 million USD in 2023. However, in 2024, it declined to 82,071 million USD. The growth in invested capital through most of the period indicates expansion or investment activities, while the slight downturn in the final year could reflect divestitures, asset write-downs, or a moderation in capital expenditures.

The financial data presents a clear trend of deteriorating economic profit over a five-year period, indicating increasing challenges in generating returns above the cost of capital.

Economic Profit

Economic profit, measured in millions of US dollars, shows a consistent and significant decline from -297 million in 2020 to a low of -4,354 million in 2023, before slightly improving to -3,764 million in 2024. This negative trajectory suggests the company has been experiencing increasing economic losses, with the greatest deficit occurring in 2023.

Invested Capital

Invested capital steadily increased from 61,158 million US dollars in 2020 to a peak of 85,573 million in 2023. However, there is a slight reduction to 82,071 million in 2024. The general upward trend in invested capital indicates the company expanded its asset base or investments significantly over the period, though the slight decline at the end may reflect divestitures or asset reduction.

Economic Spread Ratio

The economic spread ratio, which reflects the difference between return on invested capital and the cost of capital, is consistently negative and worsening over time. It declined from -0.49% in 2020 to -5.09% in 2023, indicating that the returns generated by the capital employed are becoming less sufficient relative to the cost of that capital. In 2024, there is a marginal improvement to -4.59%, but the negative spread persists significantly.

Overall, the analysis reveals that the company has been facing increasing economic losses despite expanding invested capital, with worsening returns relative to capital costs over the majority of the period. The slight improvements observed in 2024 in both economic profit and spread ratio may signal initial steps towards reversing these trends, but the company continues to operate under negative economic profit conditions.

Revenues

The company's revenues have shown a consistent upward trend from 2020 to 2022, increasing from $32,218 million to $44,915 million. However, there is a slight decline observed in 2023, with revenues decreasing to $42,857 million, followed by stabilization in 2024 at approximately $42,879 million. This indicates a period of growth initially, followed by a plateau phase in the more recent years.

Economic Profit

The economic profit exhibits a negative value throughout the analyzed periods, indicating losses in economic profit each year. The magnitude of these losses has increased significantly over time, starting from -$297 million in 2020 and worsening to -$4,354 million in 2023. In 2024, there is a slight improvement with the economic profit loss reducing to -$3,764 million, though it remains substantially negative. This trend suggests growing inefficiencies or higher costs relative to the returns generated.

Economic Profit Margin

The economic profit margin follows a deteriorating pattern between 2020 and 2023, moving from -0.92% to -10.16%. In 2024, a modest improvement occurs with the margin increasing to -8.78%, yet it still remains deeply negative. The margin trend aligns with the economic profit values and implies declining profitability in relation to revenues, although the slight recovery in the final period may suggest some initial corrective measures or improved operating conditions.