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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- Balance Sheet: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Union Pacific 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 analysis of the financial data reveals several key trends in profitability, costs, and invested capital over the five-year period from 2020 to 2024.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows an overall upward trend from 2020 through 2022, increasing from $6,650 million in 2020 to a peak of $8,288 million in 2022. This growth indicates improved operating performance initially. However, NOPAT declined in 2023 to $7,558 million before modestly rising again in 2024 to $7,772 million. The dip in 2023 suggests some temporary operational challenges or external pressures affecting profitability.
- Cost of Capital
- The cost of capital demonstrates a steady increase over the period, starting at 13.58% in 2020 and rising incrementally to 14.03% by 2024. This upward trend signals a gradual increase in the required return rate for the company’s investments, which could impact investment decisions and valuation considerations.
- Invested Capital
- Invested capital shows a generally increasing trajectory, beginning at $58,340 million in 2020 and reaching $62,044 million by 2024. The investment has steadily grown each year, indicating continued capital allocation into operations or assets, albeit at a moderate pace.
- Economic Profit
- Economic profit reveals more volatility during the period. The company experienced negative economic profit in 2020 (-$1,274 million) and 2021 (-$357 million), reflecting that returns did not cover the cost of capital in these years. In 2022, economic profit turned positive at $141 million, signaling value creation for shareholders as returns exceeded capital costs briefly. However, economic profit fell back to negative territory in 2023 (-$998 million) and 2024 (-$931 million), denoting a recurring inability to generate returns above the capital charge despite growing NOPAT and invested capital.
In summary, the company's operating profit improved initially but faced setbacks after 2022, while its cost of capital steadily increased. The expansion in invested capital suggests ongoing resource commitment. However, the fluctuation and predominantly negative economic profit indicate that the returns frequently failed to surpass the cost of capital, highlighting challenges in achieving sustained economic value creation over the reported period.
Net Operating Profit after Taxes (NOPAT)
Union Pacific Corp., NOPAT calculation
US$ 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 doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income.
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.
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.
- Net Income
- Net income exhibited a generally upward trend over the five-year period, starting at 5,349 million US dollars in 2020 and increasing to 6,747 million US dollars in 2024. The most significant increase occurred between 2020 and 2021, with an approximate rise of 1,174 million US dollars. Following this, growth continued but at a slower pace, with a slight dip observed in 2023 where net income decreased to 6,379 million US dollars from the previous year's 6,998 million. However, net income recovered in 2024, reaching 6,747 million US dollars, indicating resilience after the decline.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated a consistent growth pattern from 2020 to 2022, rising from 6,650 million US dollars to 8,288 million US dollars. This growth trend aligns with the net income increases during the same period. In 2023, NOPAT declined to 7,558 million US dollars, mirroring the reduction observed in net income, and then increased slightly to 7,772 million US dollars in 2024. Despite the drop in 2023, the overall trajectory over the five years remains positive, with a total increase of 1,122 million US dollars from 2020 to 2024.
- Comparative Insights
- Both net income and NOPAT experienced growth from 2020 through 2022, followed by a decline in 2023 and a partial recovery in 2024. The decline in 2023 in both metrics suggests operational or market challenges during that year, while the recovery in 2024 indicates an improvement in conditions or performance. The proportional differences between net income and NOPAT values suggest effective management of taxes and operating expenses over the years, with NOPAT consistently exceeding net income, reflecting the inclusion of operating-related adjustments in its calculation. Overall, the data suggest a relatively stable profitability profile with some fluctuation centered around 2023, but an overall positive trend across the observed periods.
Cash Operating Taxes
Union Pacific 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 demonstrated an overall increasing trend over the five-year period, rising from 1,631 million US dollars in 2020 to 2,047 million US dollars in 2024. There was a consistent increase from 2020 through 2022, peaking at 2,074 million US dollars in 2022. However, in 2023, a decline to 1,854 million US dollars was observed before increasing again in 2024.
- Cash Operating Taxes
- Cash operating taxes also exhibited an upward trajectory over the period under review, starting at 1,543 million US dollars in 2020 and reaching 2,285 million US dollars by 2024. The values rose steadily each year, except for a slight dip in 2023 to 2,020 million US dollars, followed by a recovery in 2024 to the highest level recorded.
- Comparative Observations
- Both income tax expense and cash operating taxes followed similar trends, including a noticeable decline in 2023 before increasing again in 2024. Cash operating taxes consistently exceeded income tax expense across all years, indicating higher actual tax outflows relative to the recorded income tax expense. The data suggest some volatility in tax-related cash flows in 2023, which may warrant further examination to understand drivers such as changes in tax payments or accounting treatments during that period.
Invested Capital
Union Pacific 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 common shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of short-term investments.
The financial data exhibits several notable trends in debt, equity, and invested capital over the five-year period.
- Total Reported Debt & Leases
- This item showed a steady increase from 28,333 million US dollars at the end of 2020, peaking at 34,957 million in 2022. Subsequently, there is a declining trend in the following years, with debt and leases reducing to 32,463 million by the end of 2024. This pattern suggests an initial phase of increased leverage followed by a strategic reduction in debt levels.
- Common Shareholders' Equity
- The equity value demonstrates a declining trend from 16,958 million in 2020 to 12,163 million in 2022, indicating a reduction in shareholders' equity through those years. However, this trend reverses post-2022, with equity rising to 16,890 million by the end of 2024. The recovery in equity after 2022 points to improved retained earnings, capital injections, or other equity-enhancing actions.
- Invested Capital
- Invested capital remains relatively stable across the period, fluctuating within a range from approximately 58,241 million to 62,044 million. A slight upward trajectory is observable, with the figure reaching its highest point in 2024. This stability, combined with minor growth, implies consistent investment in operational or capital assets without significant expansion or contraction.
Overall, the data reflects a phase of increased leverage and declining equity until 2022, followed by a period of deleveraging and equity restoration. Invested capital maintained relative steadiness with slight growth, suggesting ongoing investment continuity. These dynamics may signal a strategic financial repositioning focused on balancing debt reduction with equity strengthening while sustaining capital investment levels.
Cost of Capital
Union Pacific 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
Union Pacific 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 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| United Airlines Holdings Inc. | ||||||
| United Parcel Service Inc. | ||||||
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 showed a negative value in 2020 with -1274 million US dollars, improving significantly to -357 million in 2021. It turned positive in 2022 with 141 million US dollars, indicating a period of economic profitability. However, this was followed by a decline back into negative territory in 2023 and 2024, with values of -998 million and -931 million US dollars respectively, signaling a reduction in economic profitability during these years.
- Invested Capital
- Invested capital exhibited a generally upward trend from 2020 through 2024. Starting at 58,340 million US dollars in 2020, it experienced a slight decrease to 58,241 million in 2021, then increased steadily each subsequent year, reaching 62,044 million US dollars by the end of 2024. This indicates ongoing capital investments or asset growth over the period.
- Economic Spread Ratio
- The economic spread ratio mirrored the trend observed in economic profit, beginning with a negative spread of -2.18% in 2020, improving towards zero in 2021 (-0.61%) and turning positive at 0.24% in 2022. Nevertheless, the ratio reverted to negative values in 2023 (-1.62%) and slightly improved but remained negative in 2024 (-1.5%). This suggests a fluctuating efficiency in generating returns above the cost of capital, with a brief positive performance in 2022 followed by decreased economic spread in later years.
Economic Profit Margin
Union Pacific 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 | ||||||
| Operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| United Airlines Holdings Inc. | ||||||
| United Parcel Service Inc. | ||||||
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 ÷ Operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Operating Revenues
- Operating revenues show a positive trend from 2020 through 2024, increasing from 19,533 million US dollars in 2020 to 24,250 million US dollars in 2024. Revenues peaked in 2022 at 24,875 million US dollars, followed by a slight decline in 2023 to 24,119 million US dollars. In 2024, revenues slightly rebounded to 24,250 million US dollars.
- Economic Profit
- The economic profit exhibits significant fluctuations over the observed period. It was negative in 2020 (-1,274 million US dollars) and showed improvement in 2021 (-357 million US dollars), turning positive in 2022 at 141 million US dollars. However, economic profit declined sharply in 2023, reverting to negative territory at -998 million US dollars and remained negative in 2024 with -931 million US dollars. This indicates volatility and challenges in maintaining profitability despite revenue growth.
- Economic Profit Margin
- The economic profit margin follows a pattern consistent with economic profit. The margin improved from -6.52% in 2020 to -1.64% in 2021, turning positive at 0.57% in 2022. Subsequently, it declined to -4.14% in 2023 and slightly improved to -3.84% in 2024. This suggests that profitability relative to revenues weakened after 2022, aligning with the negative economic profit figures in subsequent years.
- Overall Analysis
- The data reveals that while operating revenues generally increased over the five-year period, economic profit and economic profit margin did not sustain this positive trend. After reaching a peak in 2022 with positive economic profit and margin, both metrics deteriorated notably in 2023 and 2024, indicating increased costs, decreased efficiency, or other factors adversely impacting profitability. The disparity between steady revenue growth and declining profitability metrics highlights potential operational or market challenges affecting economic value generation during the latter years analyzed.