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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- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- 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 annual financial data reveals several key trends in the company's performance and capital management over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibits a general upward trend from 2020 through 2024. Starting at 6,650 million USD in 2020, it increased steadily to reach a peak of 8,288 million USD in 2022. Although there was a slight decline to 7,558 million USD in 2023, the figure rebounded somewhat in 2024 to 7,772 million USD, indicating resilience in operational profitability despite minor fluctuations.
- Cost of Capital
- The cost of capital has gradually increased throughout the period, moving from 13.6% in 2020 to 14.05% in 2024. This upward progression suggests a rising expense for financing invested capital, which could be influenced by market conditions or changes in the company’s risk profile.
- Invested Capital
- Invested capital showed a steady, incremental rise from 58,340 million USD in 2020 to 62,044 million USD in 2024. This reflects ongoing investment in assets or operations, expanding the capital base over the years without any significant contraction.
- Economic Profit
- Economic profit fluctuates considerably, highlighting varying degrees of value creation relative to the cost of capital. Initially, the figure is negative at -1,286 million USD in 2020, improves substantially to a positive 128 million USD in 2022, indicating a rare period where returns exceeded capital costs. However, economic profit falls back into negative territory in 2023 and 2024, recording -1,011 million USD and -944 million USD respectively. This pattern suggests that while operational profit was growing, the increased cost of capital and expanding invested capital made it difficult for the company to consistently generate returns above its capital charges.
Overall, the company improved its net operating profits during this period and steadily increased invested capital. However, the rising cost of capital and fluctuating economic profit indicate challenges in consistently achieving returns that surpass the cost of its investments. The negative economic profit in most years points to potential inefficiencies or competitive pressures affecting value creation.
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 shows significant fluctuations over the observed periods. Starting with a substantial loss of 1,286 million USD, it improves markedly by 2022 to a positive figure of 128 million USD, indicating a temporary period of value creation. However, the economic profit declines again in the following years, returning to negative territory with losses around 1,011 million and 944 million USD in the last two periods. This pattern suggests volatility in profitability and challenges in sustaining economic value generation consistently.
- Invested Capital
- The invested capital exhibits a steady upward trend throughout the periods under review. It increases from approximately 58,340 million USD to 62,044 million USD by the latest period, reflecting ongoing investment or asset accumulation. This gradual increase suggests a commitment to maintaining or expanding the asset base despite variable profitability.
- Economic Spread Ratio
- The economic spread ratio, representing the return spread over the cost of capital, aligns with the trend in economic profit. It begins at a negative -2.2%, improves substantially to a positive 0.21% in 2022, indicating a period when returns exceeded costs. Nonetheless, this ratio declines again in the last two periods to negative values (-1.64% and -1.52%), signaling a declining spread and an erosion of economic rent generation. The movements in this ratio underscore the challenges in achieving returns above the cost of capital on a consistent basis.
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 have shown a generally increasing trend from 2020 to 2024, rising from approximately 19.5 billion US dollars in 2020 to around 24.3 billion US dollars in 2024. The most notable growth occurred between 2020 and 2022, with revenues increasing by about 27%, followed by a slight dip in 2023 before stabilizing in 2024.
- Economic Profit
- Economic profit displays considerable volatility over the observed period. Initially, the company reported a significant negative economic profit of 1.286 billion US dollars in 2020, which improved substantially in 2021 to a loss of 369 million US dollars, and further turned positive to 128 million US dollars in 2022. However, this positive performance was not sustained, as economic profit declined sharply to negative 1.011 billion US dollars in 2023 and remained negative at 944 million US dollars in 2024. This pattern suggests challenges in maintaining profitability despite growing revenues.
- Economic Profit Margin
- The economic profit margin mirrors the trend in economic profit, starting at a negative 6.58% in 2020 and improving progressively to reach a positive margin of 0.52% in 2022. Subsequently, the margin deteriorated significantly to -4.19% in 2023 and slightly improved to -3.89% in 2024. This indicates a compression in profitability margins after a brief positive phase, highlighting underlying issues affecting the company's capacity to generate economic profit relative to its revenues.
- Overall Analysis
- Although operating revenues have been on an upward trajectory, the economic profit and associated margin reveal instability and declining profitability in recent years. The company's economic profit improvements until 2022 were not sustained, and profitability trends worsened significantly in 2023 and 2024. This divergence between revenue growth and economic profit suggests rising costs or diminishing returns, which might require strategic adjustments to restore and stabilize economic profitability.