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
Union Pacific 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
= 8,399 – 15.78% × 63,642 = -1,644
The financial performance from 2021 through 2025 is characterized by a persistent inability to generate positive economic profit, indicating that the return on invested capital has remained below the company's cost of capital throughout the period. While net operating profit after taxes has shown overall growth, it has not scaled at a rate sufficient to offset the combined impact of increasing invested capital and a rising cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited volatility over the five-year period. An initial increase from 7,625 million US$ in 2021 to 8,288 million US$ in 2022 was followed by a contraction to 7,558 million US$ in 2023. However, a recovery trend emerged in the subsequent two years, with NOPAT reaching a period high of 8,399 million US$ by December 31, 2025.
- Invested Capital and Capital Charge
- A consistent upward trend in invested capital is observed, growing steadily from 58,241 million US$ in 2021 to 63,642 million US$ in 2025. This expansion of the capital base, coupled with a cost of capital that rose from 15.40% in 2021 to 15.78% by 2024 and 2025, has increased the total capital charge required to achieve economic break-even.
- Economic Profit Trends
- Economic profit remained negative throughout the entire analysis period, signifying ongoing economic value destruction. The most significant deterioration occurred in 2023, where economic profit dropped to -2,061 million US$. While there was a slight recovery toward -1,644 million US$ by 2025, the figure remains substantially below zero, reflecting a gap between operational earnings and the opportunity cost of the invested capital.
- Correlation Analysis
- The divergence between the growth in NOPAT and the growth in invested capital is the primary driver of the negative economic profit. The peak economic loss in 2023 correlates directly with the sharp decline in NOPAT during that same year, while the steady rise in the cost of capital since 2022 has further pressured the ability to return to a positive economic value added state.
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Net Operating Profit after Taxes (NOPAT)
Union Pacific 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 doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,008 × 4.00% = 40
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,349 × 21.00% = 283
6 Addition of after taxes interest expense to net income.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 56 × 21.00% = 12
8 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited a generally positive trajectory over the five-year period, though with some fluctuation. While net income demonstrated consistent growth, NOPAT presented a more nuanced pattern. Initial observations suggest a strong correlation between the two metrics, but variances warrant further investigation.
- Overall Trend
- NOPAT increased from US$7,625 million in 2021 to US$8,399 million in 2025. This represents a cumulative increase of approximately 10.2% over the period. However, the growth was not linear.
- Year-over-Year Changes
- A significant increase in NOPAT was observed between 2021 and 2022, rising by US$663 million, or 8.7%. This was the largest single-year increase in the observed period. A subsequent decrease occurred between 2022 and 2023, with NOPAT falling to US$7,558 million, a decline of US$730 million, or 8.8%. The period from 2023 to 2024 showed a modest recovery, with NOPAT reaching US$7,772 million, an increase of US$214 million, or 2.8%. The most substantial growth occurred between 2024 and 2025, with NOPAT increasing by US$627 million, or 8.1%.
- Relationship to Net Income
- While both net income and NOPAT generally increased, the magnitude of change differed. The difference between NOPAT and net income remained relatively stable throughout the period, suggesting consistent treatment of items impacting net income but not NOPAT, such as interest expense and non-operating items. The consistent difference indicates a predictable relationship between the two metrics.
The fluctuations in NOPAT, particularly the decline from 2022 to 2023, suggest potential impacts from operational factors or changes in the tax environment. The strong finish in 2025 indicates a potential return to improved operational efficiency or favorable market conditions. Further analysis, incorporating cost of capital, is necessary to determine the true economic value creation.
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Cash Operating Taxes
Union Pacific Corp., cash operating taxes calculation
US$ 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 and cash operating taxes exhibit generally stable patterns over the five-year period, with some fluctuations observed. Cash operating taxes consistently exceed income tax expense annually.
- Income Tax Expense
- Income tax expense increased from US$1,955 million in 2021 to US$2,074 million in 2022, representing a 5.8% increase. A subsequent decrease was noted in 2023, falling to US$1,854 million. This was followed by increases in both 2024 and 2025, reaching US$2,047 million and US$2,028 million respectively. The 2025 value is slightly below the 2024 value, indicating a minor deceleration in growth.
- Cash Operating Taxes
- Cash operating taxes demonstrated a modest increase from US$2,055 million in 2021 to US$2,085 million in 2022, a 1.5% rise. The value decreased slightly in 2023 to US$2,020 million. A more substantial increase occurred in 2024, reaching US$2,285 million. The 2025 value decreased to US$2,059 million, representing a significant reduction from the 2024 peak.
- Relationship between Income Tax Expense and Cash Operating Taxes
- The difference between cash operating taxes and income tax expense remained positive throughout the period, ranging from approximately US$100 million to US$430 million. This suggests the presence of non-cash tax items or timing differences between reported income tax expense and actual cash outflows for taxes. The largest difference was observed in 2024, while the smallest difference occurred in 2021. The gap narrowed in 2025 as both values decreased.
Overall, the fluctuations in both income tax expense and cash operating taxes appear relatively contained. The increase in cash operating taxes in 2024, followed by a decrease in 2025, warrants further investigation to understand the underlying drivers of these changes and their impact on economic value added calculations.
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Invested Capital
Union Pacific Corp., invested capital calculation (financing approach)
US$ 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 common shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of short-term investments.
The reported invested capital demonstrates a consistent upward trend over the five-year period. Total reported debt & leases and common shareholders’ equity contribute to this invested capital figure, exhibiting individual patterns that influence the overall trend.
- Invested Capital Trend
- Invested capital increased from US$58,241 million in 2021 to US$63,642 million in 2025. This represents a cumulative increase of approximately 9.3% over the period. The growth was not linear, with a slight deceleration in the rate of increase between 2022 and 2023, followed by a resumption of growth in subsequent years.
- Debt & Leases
- Total reported debt & leases increased from US$31,488 million in 2021 to US$34,957 million in 2022, representing a significant increase. However, this was followed by a decrease to US$34,179 million in 2023. The trend continued downward to US$32,463 million in 2024 before a slight increase to US$32,822 million in 2025. Overall, the debt & leases remained relatively stable between 2023 and 2025, fluctuating within a narrow range.
- Common Shareholders’ Equity
- Common shareholders’ equity experienced a decrease from US$14,161 million in 2021 to US$12,163 million in 2022. This was followed by a recovery, increasing to US$14,788 million in 2023, US$16,890 million in 2024, and further to US$18,467 million in 2025. This demonstrates a consistent upward trend in equity over the latter part of the period, contributing to the overall increase in invested capital.
The combined effect of these trends indicates a shift in the capital structure. While debt initially increased, it subsequently stabilized and slightly decreased, while equity experienced a more pronounced and sustained growth. This suggests a potential move towards a more equity-financed capital structure over the observed timeframe, although debt remains a substantial component of invested capital.
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Cost of Capital
Union Pacific Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 149,903) | 149,903) | ÷ | 177,411) | = | 0.84 | 0.84 | × | 17.65% | = | 14.92% | ||
| Debt3 | 26,500) | 26,500) | ÷ | 177,411) | = | 0.15 | 0.15 | × | 7.17% × (1 – 21.00%) | = | 0.85% | ||
| Operating lease liability4 | 1,008) | 1,008) | ÷ | 177,411) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 177,411) | 1.00 | 15.78% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 146,286) | 146,286) | ÷ | 172,857) | = | 0.85 | 0.85 | × | 17.65% | = | 14.94% | ||
| Debt3 | 25,300) | 25,300) | ÷ | 172,857) | = | 0.15 | 0.15 | × | 7.07% × (1 – 21.00%) | = | 0.82% | ||
| Operating lease liability4 | 1,271) | 1,271) | ÷ | 172,857) | = | 0.01 | 0.01 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 172,857) | 1.00 | 15.78% | ||||||||||
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 | 152,109) | 152,109) | ÷ | 182,209) | = | 0.83 | 0.83 | × | 17.65% | = | 14.74% | ||
| Debt3 | 28,500) | 28,500) | ÷ | 182,209) | = | 0.16 | 0.16 | × | 7.07% × (1 – 21.00%) | = | 0.87% | ||
| Operating lease liability4 | 1,600) | 1,600) | ÷ | 182,209) | = | 0.01 | 0.01 | × | 3.60% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 182,209) | 1.00 | 15.64% | ||||||||||
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 | 125,740) | 125,740) | ÷ | 155,471) | = | 0.81 | 0.81 | × | 17.65% | = | 14.28% | ||
| Debt3 | 28,100) | 28,100) | ÷ | 155,471) | = | 0.18 | 0.18 | × | 7.05% × (1 – 21.00%) | = | 1.01% | ||
| Operating lease liability4 | 1,631) | 1,631) | ÷ | 155,471) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 155,471) | 1.00 | 15.31% | ||||||||||
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 | 154,378) | 154,378) | ÷ | 189,037) | = | 0.82 | 0.82 | × | 17.65% | = | 14.42% | ||
| Debt3 | 32,900) | 32,900) | ÷ | 189,037) | = | 0.17 | 0.17 | × | 6.96% × (1 – 21.00%) | = | 0.96% | ||
| Operating lease liability4 | 1,759) | 1,759) | ÷ | 189,037) | = | 0.01 | 0.01 | × | 3.20% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 189,037) | 1.00 | 15.40% | ||||||||||
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
Union Pacific 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 | (1,644) | (2,018) | (2,061) | (860) | (1,342) | |
| Invested capital2 | 63,642) | 62,044) | 61,524) | 59,751) | 58,241) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.58% | -3.25% | -3.35% | -1.44% | -2.30% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.78% | -7.97% | -6.50% | -6.13% | -3.58% | |
| Uber Technologies Inc. | 14.08% | 6.22% | -3.60% | -73.60% | -22.77% | |
| United Airlines Holdings Inc. | -2.57% | -1.75% | 0.91% | -3.31% | -10.24% | |
| United Parcel Service Inc. | -2.39% | -1.94% | 0.77% | 11.75% | 17.57% | |
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 × -1,644 ÷ 63,642 = -2.58%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 indicates a persistent failure to generate economic value, characterized by consistently negative economic profit and a negative economic spread ratio. Despite a steady increase in the capital base, the returns generated remain below the cost of capital, resulting in ongoing value destruction.
- Economic Profit
- Economic profit remained negative throughout the analyzed period. A temporary improvement occurred in 2022, where the deficit narrowed to 860 million USD, before widening significantly to a peak loss of 2,061 million USD in 2023. A gradual recovery trend is observed in the subsequent two years, with the economic loss improving to 2,018 million USD in 2024 and further to 1,644 million USD by the end of 2025.
- Invested Capital
- Invested capital exhibits a consistent and linear upward trend, increasing from 58,241 million USD in 2021 to 63,642 million USD in 2025. This indicates a continuous expansion of the capital base despite the company's inability to generate a positive economic spread.
- Economic Spread Ratio
- The economic spread ratio remained negative for the entire five-year duration, confirming that the return on invested capital failed to exceed the weighted average cost of capital. The ratio reached its least negative point in 2022 at -1.44%, followed by a sharp decline to -3.35% in 2023. A moderate recovery is observed through 2024 and 2025, ending the period at -2.58%, suggesting a slight improvement in the efficiency of capital utilization relative to its cost, although the overall position remains suboptimal.
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Economic Profit Margin
Union Pacific 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 | (1,644) | (2,018) | (2,061) | (860) | (1,342) | |
| Operating revenues | 24,510) | 24,250) | 24,119) | 24,875) | 21,804) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -6.71% | -8.32% | -8.55% | -3.46% | -6.15% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -5.42% | -6.39% | -5.01% | -4.36% | -2.74% | |
| Uber Technologies Inc. | 4.27% | 2.11% | -1.51% | -37.73% | -20.97% | |
| United Airlines Holdings Inc. | -2.18% | -1.51% | 0.76% | -3.02% | -21.56% | |
| United Parcel Service Inc. | -1.37% | -1.03% | 0.38% | 5.24% | 8.02% | |
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 ÷ Operating revenues
= 100 × -1,644 ÷ 24,510 = -6.71%
3 Click competitor name to see calculations.
The financial performance over the five-year period is characterized by a consistent failure to generate positive economic value, as economic profit remained negative from 2021 through 2025. Despite fluctuations in the magnitude of these losses, the company consistently failed to earn returns exceeding its cost of capital.
- Economic Profit Trends
- Economic profit exhibited significant volatility, beginning at -1,342 million USD in 2021 and improving to -860 million USD in 2022. However, a sharp deterioration occurred in 2023, where losses widened to -2,061 million USD. A gradual recovery trend is observable in the final two years, with losses narrowing to -2,018 million USD in 2024 and -1,644 million USD in 2025.
- Operating Revenue Performance
- Operating revenues showed an overall upward trajectory, increasing from 21,804 million USD in 2021 to 24,510 million USD by 2025. A peak in revenue was noted in 2022 at 24,875 million USD, followed by a slight contraction in 2023. The stability of revenue growth contrasts with the volatility of economic profit, suggesting that top-line growth was insufficient to offset the cost of capital employed.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the trajectory of absolute economic profit, reflecting a persistent negative return. The margin improved to its highest point of -3.46% in 2022 before plummeting to -8.55% in 2023. Since that low point, the margin has shown incremental improvement, reaching -6.71% by the end of 2025. The divergence between increasing revenues and a negative profit margin indicates an underlying inefficiency in converting operational scale into economic value.
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