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 – 15.71% × 63,642 = -1,600
An analysis of the financial performance from 2021 to 2025 reveals a persistent failure to generate positive economic profit. Despite fluctuations and an overall increase in net operating profit after taxes, the returns generated remain insufficient to cover the cost of the capital employed in operations.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a volatile trend over the five-year period. After an initial increase from 7,625 million US$ in 2021 to 8,288 million US$ in 2022, a contraction occurred in 2023, with figures dropping to 7,558 million US$. However, a recovery trend followed, culminating in a peak of 8,399 million US$ by 2025. While the absolute profit increased over the long term, the growth was not linear.
- Capital Requirements and Cost of Capital
- Invested capital showed a consistent and steady upward trajectory, rising from 58,241 million US$ in 2021 to 63,642 million US$ in 2025. Parallel to this expansion of the capital base, the cost of capital generally increased, moving from 15.33% in 2021 to a plateau of 15.71% in 2024 and 2025. The simultaneous increase in both the amount of capital invested and the rate required to justify that investment has created a higher threshold for achieving value creation.
- Economic Profit Performance
- Economic profit remained negative throughout the entire period, indicating that the company did not create economic value above its cost of capital. The most significant deficit occurred in 2023, reaching -2,019 million US$, which coincided with a dip in NOPAT and a rise in the cost of capital. Although the economic profit improved to -1,600 million US$ by 2025, the persistent negative values suggest that the growth in operating profits has been outpaced by the growth in the capital charge.
The overall trend indicates a structural gap between the operational returns and the cost of financing. The steady increase in invested capital without a proportional and sustainable surge in NOPAT has resulted in a sustained period of economic value destruction.
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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$18,467 million in 2025. This demonstrates a consistent upward trend in equity over the latter part of the period, contributing to the overall increase in invested capital.
The combined effect of these trends indicates a shift in the capital structure. While debt initially increased, it subsequently stabilized and slightly decreased, while equity experienced a more pronounced and sustained growth. This suggests a potential move towards a more equity-financed capital structure over the observed timeframe, although debt remains a substantial component of invested capital.
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Cost of Capital
Union Pacific Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 149,903) | 149,903) | ÷ | 177,411) | = | 0.84 | 0.84 | × | 17.57% | = | 14.85% | ||
| Debt3 | 26,500) | 26,500) | ÷ | 177,411) | = | 0.15 | 0.15 | × | 7.17% × (1 – 21.00%) | = | 0.85% | ||
| Operating lease liability4 | 1,008) | 1,008) | ÷ | 177,411) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 177,411) | 1.00 | 15.71% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 17.57% | = | 14.87% | ||
| 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 | 15.71% | ||||||||||
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 | × | 17.57% | = | 14.67% | ||
| 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 | 15.57% | ||||||||||
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 | × | 17.57% | = | 14.21% | ||
| 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 | 15.24% | ||||||||||
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 | × | 17.57% | = | 14.35% | ||
| 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 | 15.33% | ||||||||||
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 | (1,600) | (1,975) | (2,019) | (820) | (1,303) | |
| Invested capital2 | 63,642) | 62,044) | 61,524) | 59,751) | 58,241) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.51% | -3.18% | -3.28% | -1.37% | -2.24% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.08% | -7.20% | -5.76% | -5.43% | -2.82% | |
| Uber Technologies Inc. | 14.05% | 6.19% | -3.63% | -73.64% | -22.80% | |
| United Airlines Holdings Inc. | -2.62% | -1.79% | 0.88% | -3.33% | -10.26% | |
| United Parcel Service Inc. | -2.37% | -1.92% | 0.79% | 11.77% | 17.60% | |
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 × -1,600 ÷ 63,642 = -2.51%
4 Click competitor name to see calculations.
An analysis of the financial performance from 2021 through 2025 reveals a consistent failure to generate positive economic value, as evidenced by persistently negative economic profit and a negative economic spread ratio throughout the period.
- Economic Profit Trends
- Economic profit remained negative for the entire five-year duration, indicating that the returns generated were insufficient to cover the company's cost of capital. A temporary improvement was noted in 2022, where the deficit narrowed to -820 million USD, before a significant deterioration in 2023, reaching a period low of -2,019 million USD. While the figures showed modest recovery in 2024 and 2025, ending at -1,600 million USD, the company has not returned to a state of positive value creation.
- Invested Capital Growth
- Invested capital exhibited a steady and uninterrupted upward trajectory, growing from 58,241 million USD in 2021 to 63,642 million USD by 2025. This consistent increase suggests ongoing capital expenditures or acquisitions, yet this expansion of the capital base has not translated into positive economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of the economic profit, remaining negative across all observed years. The ratio peaked at -1.37% in 2022 before dropping to its lowest point of -3.28% in 2023. Although the ratio improved to -2.51% by 2025, the persistent negative spread confirms that the return on invested capital remains below the weighted average cost of capital, resulting in a continuous erosion of shareholder value over the analyzed timeframe.
In summary, the data indicates a divergence between capital investment and value generation. Despite a continuous increase in invested capital, the inability to flip the economic spread ratio to a positive percentage demonstrates an inefficiency in converting capital growth into economic surplus.
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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 | (1,600) | (1,975) | (2,019) | (820) | (1,303) | |
| Operating revenues | 24,510) | 24,250) | 24,119) | 24,875) | 21,804) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -6.53% | -8.14% | -8.37% | -3.30% | -5.98% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -4.87% | -5.77% | -4.45% | -3.86% | -2.16% | |
| Uber Technologies Inc. | 4.26% | 2.10% | -1.53% | -37.75% | -21.00% | |
| United Airlines Holdings Inc. | -2.21% | -1.54% | 0.74% | -3.04% | -21.61% | |
| United Parcel Service Inc. | -1.35% | -1.01% | 0.40% | 5.25% | 8.03% | |
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 × -1,600 ÷ 24,510 = -6.53%
3 Click competitor name to see calculations.
Union Pacific Corp. has experienced consistent negative economic profit from 2021 through 2025, indicating that net operating profit after taxes has remained below the company's cost of capital throughout the analyzed period.
- Economic Profit Trends
- Economic profit exhibited significant volatility, starting at -1,303 million USD in 2021 and improving to -820 million USD in 2022. A substantial deterioration occurred in 2023, with economic profit falling to -2,019 million USD. A gradual recovery followed, with losses narrowing to -1,975 million USD in 2024 and -1,600 million USD by 2025.
- Operating Revenue Performance
- Operating revenues followed a general upward trajectory, increasing from 21,804 million USD in 2021 to 24,510 million USD in 2025. Despite a slight contraction in 2023, the overall growth in revenue suggests an expansion in operational scale that has not yet translated into positive economic value added.
- Economic Profit Margin Analysis
- The economic profit margin remained negative for the entire duration, reflecting a persistent failure to cover the cost of invested capital. The margin improved to -3.30% in 2022 before dropping sharply to its lowest level of -8.37% in 2023. A recovery trend is observable in the final two years, with the margin improving to -8.14% in 2024 and -6.53% in 2025. The widening gap between revenue growth and economic profit in 2023 suggests that capital costs or operating inefficiencies outweighed the gains in top-line revenue during that period.
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