Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Union Pacific Corp. (NYSE:UNP)

Economic Value Added (EVA)

Advanced level

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

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net operating profit after taxes (NOPAT)1 6,641  7,344  7,053  6,171  5,592 
Cost of capital2 11.13% 11.20% 11.42% 11.24% 11.20%
Invested capital3 58,340  57,204  56,573  55,136  53,539 
 
Economic profit4 145  939  595  (28) (405)

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-03).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 6,64111.13% × 58,340 = 145

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Union Pacific Corp.’s economic profit increased from 2018 to 2019 but then decreased significantly from 2019 to 2020.

Net Operating Profit after Taxes (NOPAT)

Union Pacific Corp., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income 5,349  5,919  5,966  10,712  4,233 
Deferred income tax expense (benefit)1 340  566  339  (5,067) 831 
Increase (decrease) in allowance for doubtful accounts2 13  —  (2) — 
Increase (decrease) in equity equivalents3 353  567  339  (5,069) 831 
Interest expense 1,141  1,050  870  719  698 
Interest expense, operating lease liability4 59  68  107  109  125 
Adjusted interest expense 1,200  1,118  977  828  823 
Tax benefit of interest expense5 (252) (235) (205) (290) (288)
Adjusted interest expense, after taxes6 948  883  771  538  535 
Interest income (12) (32) (30) (16) (11)
Investment income, before taxes (12) (32) (30) (16) (11)
Tax expense (benefit) of investment income7
Investment income, after taxes8 (9) (25) (24) (10) (7)
Net operating profit after taxes (NOPAT) 6,641  7,344  7,053  6,171  5,592 

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-03).

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 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,604 × 3.70% = 59

5 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,200 × 21.00% = 252

6 Addition of after taxes interest expense to net income.

7 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 12 × 21.00% = 3

8 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Union Pacific Corp.’s NOPAT increased from 2018 to 2019 but then decreased significantly from 2019 to 2020.

Cash Operating Taxes

Union Pacific Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Income tax expense (benefit) 1,631  1,828  1,775  (3,080) 2,533 
Less: Deferred income tax expense (benefit) 340  566  339  (5,067) 831 
Add: Tax savings from interest expense 252  235  205  290  288 
Less: Tax imposed on investment income
Cash operating taxes 1,541  1,490  1,635  2,271  1,986 

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-03).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Union Pacific Corp.’s cash operating taxes decreased from 2018 to 2019 but then slightly increased from 2019 to 2020.

Invested Capital

Union Pacific Corp., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Debt due within one year 1,069  1,257  1,466  800  758 
Debt due after one year 25,660  23,943  20,925  16,144  14,249 
Operating lease liability1 1,604  1,833  2,123  2,082  2,374 
Total reported debt & leases 28,333  27,033  24,514  19,026  17,381 
Common shareholders’ equity 16,958  18,128  20,423  24,856  19,932 
Net deferred tax (assets) liabilities2 12,247  11,992  11,302  10,936  15,996 
Allowance for doubtful accounts3 17 
Equity equivalents4 12,264  11,996  11,305  10,939  16,001 
Accumulated other comprehensive (income) loss, net of tax5 1,593  1,356  1,415  1,141  1,272 
Adjusted common shareholders’ equity 30,815  31,480  33,143  36,936  37,205 
Construction in progress6 (748) (1,249) (1,024) (736) (987)
Short-term investments7 (60) (60) (60) (90) (60)
Invested capital 58,340  57,204  56,573  55,136  53,539 

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-03).

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.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Union Pacific Corp.’s invested capital increased from 2018 to 2019 and from 2019 to 2020.

Cost of Capital

Union Pacific Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 136,779  136,779  ÷ 170,283  = 0.80 0.80 × 12.53% = 10.07%
Debt3 31,900  31,900  ÷ 170,283  = 0.19 0.19 × 7.02% × (1 – 21.00%) = 1.04%
Operating lease liability4 1,604  1,604  ÷ 170,283  = 0.01 0.01 × 3.70% × (1 – 21.00%) = 0.03%
Total: 170,283  1.00 11.13%

Based on: 10-K (filing date: 2021-02-05).

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 126,891  126,891  ÷ 155,924  = 0.81 0.81 × 12.53% = 10.20%
Debt3 27,200  27,200  ÷ 155,924  = 0.17 0.17 × 6.99% × (1 – 21.00%) = 0.96%
Operating lease liability4 1,833  1,833  ÷ 155,924  = 0.01 0.01 × 3.70% × (1 – 21.00%) = 0.03%
Total: 155,924  1.00 11.20%

Based on: 10-K (filing date: 2020-02-07).

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 116,904  116,904  ÷ 140,927  = 0.83 0.83 × 12.53% = 10.40%
Debt3 21,900  21,900  ÷ 140,927  = 0.16 0.16 × 7.81% × (1 – 21.00%) = 0.96%
Operating lease liability4 2,123  2,123  ÷ 140,927  = 0.02 0.02 × 5.02% × (1 – 21.00%) = 0.06%
Total: 140,927  1.00 11.42%

Based on: 10-K (filing date: 2019-02-08).

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 99,190  99,190  ÷ 119,472  = 0.83 0.83 × 12.53% = 10.41%
Debt3 18,200  18,200  ÷ 119,472  = 0.15 0.15 × 7.85% × (1 – 35.00%) = 0.78%
Operating lease liability4 2,082  2,082  ÷ 119,472  = 0.02 0.02 × 5.23% × (1 – 35.00%) = 0.06%
Total: 119,472  1.00 11.24%

Based on: 10-K (filing date: 2018-02-09).

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 88,305  88,305  ÷ 106,579  = 0.83 0.83 × 12.53% = 10.38%
Debt3 15,900  15,900  ÷ 106,579  = 0.15 0.15 × 7.63% × (1 – 35.00%) = 0.74%
Operating lease liability4 2,374  2,374  ÷ 106,579  = 0.02 0.02 × 5.28% × (1 – 35.00%) = 0.08%
Total: 106,579  1.00 11.20%

Based on: 10-K (filing date: 2017-02-03).

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

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 145  939  595  (28) (405)
Invested capital2 58,340  57,204  56,573  55,136  53,539 
Performance Ratio
Economic spread ratio3 0.25% 1.64% 1.05% -0.05% -0.76%
Benchmarks
Economic Spread Ratio, Competitors4
CSX Corp. -1.21% 1.22% 0.97% -2.85% -3.04%
FedEx Corp. -4.55% -7.11% -0.58% -0.61% -3.81%
Norfolk Southern Corp. -4.75% -2.22% -2.66% -3.21% -4.84%
United Parcel Service Inc. -6.52% 4.75% 9.44% 12.89% 9.07%

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-03).

1 Economic profit. See details »

2 Invested capital. See details »

3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 145 ÷ 58,340 = 0.25%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Union Pacific Corp.’s economic spread ratio improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.

Economic Profit Margin

Union Pacific Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 145  939  595  (28) (405)
Operating revenues 19,533  21,708  22,832  21,240  19,941 
Performance Ratio
Economic profit margin2 0.74% 4.32% 2.61% -0.13% -2.03%
Benchmarks
Economic Profit Margin, Competitors3
CSX Corp. -4.32% 3.57% 2.71% -8.20% -8.82%
FedEx Corp. -3.79% -5.41% -0.47% -0.49% -3.31%
Norfolk Southern Corp. -17.20% -6.92% -7.91% -10.16% -16.02%
United Parcel Service Inc. -2.56% 2.33% 4.19% 5.69% 2.97%

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-03).

1 Economic profit. See details »

2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × 145 ÷ 19,533 = 0.74%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Union Pacific Corp.’s economic profit margin improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.