Union Pacific Corp. (NYSE:UNP)

The data reveals several notable financial trends over the five-year period. Net Operating Profit After Taxes (NOPAT) generally exhibits an upward trajectory from 2020 through 2022, increasing from $6,650 million to $8,288 million. However, this growth moderates in 2023 with a decline to $7,558 million, followed by a slight recovery to $7,772 million in 2024.

The cost of capital shows a gradual upward trend, rising steadily each year from 13.57% in 2020 to 14.02% in 2024. This increase indicates a rising required return on investment, which could affect the valuation and investment decisions.

Invested capital demonstrates incremental growth across the observed timeframe. Beginning at $58,340 million in 2020, it remains relatively stable through 2021 and then increases progressively to $62,044 million by 2024. The steady rise in invested capital suggests ongoing investment or asset accumulation within the organization.

Economic profit presents a more volatile pattern with negative values in most years. Starting with a significant economic loss of $1,269 million in 2020, the deficit reduces substantially in 2021 to $352 million. Notably, 2022 marks a positive economic profit of $146 million, indicating value creation exceeding the cost of capital for that year. However, this shifts back to economic losses in 2023 and 2024, with figures of negative $992 million and negative $925 million respectively. This reversion suggests the company struggled to generate returns above its cost of capital in the latter years.

Summary:

While NOPAT generally increased until 2022, the subsequent decline alongside rising cost of capital pressures economic profit, which fluctuated between losses and a brief positive return. Invested capital's steady increase highlights continued capital deployment, yet the recurring negative economic profits in recent years denote challenges in generating sufficient returns relative to the cost of financing.

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.

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.

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.

Economic Profit

The economic profit experienced significant fluctuations over the observed periods. It started with a substantial negative value of -1269 million US dollars in 2020, indicating losses exceeding the cost of capital. In 2021, the loss narrowed considerably to -352 million, suggesting some improvement in profitability. By 2022, economic profit turned positive to 146 million, reflecting a period of value creation. However, this positive trend was not sustained as economic profit reverted to negative figures in 2023 and 2024, showing losses of -992 million and -925 million respectively. This indicates a decline in the company’s ability to generate returns above its cost of capital in the most recent years.

Invested Capital

The invested capital showed a gradual upward trend throughout the examined years. Starting from 58,340 million US dollars in 2020, it remained relatively stable in 2021 with a slight decrease to 58,241 million. From 2022 onwards, invested capital increased consistently to 59,751 million, then 61,524 million in 2023, and further to 62,044 million in 2024. This steady growth suggests ongoing investments or asset accumulation over time.

Economic Spread Ratio

The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital as a percentage, reflected a pattern similar to economic profit. It was negative in all years except for 2022, when it turned slightly positive at 0.24%. In 2020 and 2021, the ratio was negative at -2.17% and -0.6% respectively, indicating returns below the cost of capital. The improvement in 2022 aligns with the positive economic profit observed that year. However, the spread ratio declined again in 2023 and 2024 to -1.61% and -1.49%, respectively, confirming the company's diminished economic value creation capability during these periods.

The data demonstrates notable fluctuations in both economic profit and economic profit margin over the observed five-year period. Economic profit shows a significant recovery from a substantial negative value of -1269 million US dollars in 2020 to a positive 146 million in 2022, indicating an improvement in value creation during this interval. However, this trend reverses in the subsequent years, with economic profit declining to -992 million in 2023 and slightly improving to -925 million in 2024 while remaining negative, highlighting challenges in sustaining profitability beyond 2022.

Operating revenues exhibit a generally positive trend with steady growth from 19,533 million US dollars in 2020 to a peak of 24,875 million in 2022. The revenues then experience a slight decline to 24,119 million in 2023 before inching upward again to 24,250 million in 2024. This pattern suggests robust revenue generation capabilities with minor fluctuations in the latter years.

The economic profit margin mirrors the fluctuations observed in economic profit, shifting from a deeply negative -6.5% in 2020 to reaching a positive margin of 0.59% in 2022. This improvement underscores enhanced efficiency or profitability relative to revenues during that year. However, subsequent years register declines to negative margins of -4.11% in 2023 and -3.82% in 2024, indicating deteriorated profitability margins despite relatively stable revenues.

Economic Profit

Initially negative with a strong recovery into positive territory by 2022, followed by a relapse into negative territory in 2023 and 2024.

Operating Revenues

Consistent upward trend with peak revenues in 2022, slight decrease thereafter, but overall maintaining high revenue levels near 24 billion US dollars.

Economic Profit Margin

Fluctuated from negative margins to positive in 2022, then declined back into negative percentages, reflecting volatile profitability relative to revenues.