Union Pacific Corp. (NYSE:UNP)

The financial data reveals notable trends in profitability, capital efficiency, and cost of capital over the examined five-year period.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a general upward trajectory from 2020 to 2022, increasing from $6,650 million to $8,288 million, indicating an improvement in operational profitability during this time. However, a decline is observed in 2023 to $7,558 million, followed by a modest recovery in 2024 to $7,772 million. This pattern suggests some operational challenges or external factors impacting profitability after 2022.

Cost of Capital

The cost of capital experienced a gradual increase throughout the period, rising from 13.59% in 2020 to 14.03% in 2024. This upward trend implies a growing expense of financing the company's operations and investments, which may exert downward pressure on economic profit unless offset by returns.

Invested Capital

Invested capital remained relatively stable between 2020 and 2021, with a slight decrease. However, from 2021 onward, it increased steadily each year from $58,241 million to $62,044 million by 2024. This steady growth indicates continuing capital deployment to support business activities and expansion.

Economic Profit

Economic profit shifted from negative values in 2020 and 2021 (-$1,277 million and -$361 million, respectively) to a positive figure of $137 million in 2022, reflecting that returns exceeded the cost of capital in that year. Nevertheless, in the subsequent years 2023 and 2024, economic profit reverted to negative values (-$1,002 million and -$935 million), suggesting that the cost of capital outpaced operational returns during this period.

In summary, while operational profitability improved through 2022, the simultaneous increase in cost of capital and invested capital, combined with declining economic profit after 2022, indicate challenges in generating sufficient returns above capital costs in the later years. Continuous monitoring of capital allocation efficiency and cost management appears warranted to enhance value creation going forward.

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.

The financial data reveals fluctuations in economic performance across the periods from the end of 2020 to the end of 2024. A detailed examination of economic profit, invested capital, and economic spread ratio provides several key insights.

Economic Profit

This metric shows a negative value in four out of the five years, indicating that the company generally did not generate returns in excess of its cost of capital during the majority of the period under review. Specifically, economic profit was deeply negative in 2020 at -$1,277 million, improved substantially by 2022 where it recorded a positive value of $137 million, yet declined again to negative figures in 2023 and 2024, ending these years at -$1,002 million and -$935 million respectively. This pattern suggests challenges in sustaining profitability above the cost of capital, with only a transient period of positive economic profit.

Invested Capital

Invested capital showed a gradual upward trend, increasing consistently from approximately $58.3 billion in 2020 to around $62 billion by 2024. This steady increase points to ongoing capital investment and asset base expansion. Despite growing invested capital, the economic profit did not improve correspondingly in the later years, which may indicate issues with capital efficiency or returns on new investments.

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, mirrors the trends in economic profit. It was negative throughout four years, indicating a return below cost of capital. The ratio improved from -2.19% in 2020 to -0.62% in 2021 and further to a positive 0.23% in 2022, signifying a brief period where returns marginally exceeded costs. However, the ratio reverted to negative values of -1.63% and -1.51% in 2023 and 2024 respectively, reflecting difficulties in maintaining profitable returns on invested capital.

Overall, the data depicts a company struggling to consistently generate economic profit and positive economic spread despite incrementally investing more capital. The isolated positive performance in 2022 was not sustained, signaling underlying challenges in operational efficiency, cost management, or capital utilization that influenced profitability negatively in subsequent years.

The financial data reveals several notable trends over the five-year period under review. Operating revenues show a consistent upward trajectory from 19,533 million US dollars in 2020 to 24,250 million US dollars in 2024. This represents a steady increase in the company’s top-line performance, indicating growth in sales or other revenue-generating activities year over year, except for a slight dip in 2023 compared to 2022.

In contrast, the economic profit figures exhibit significant volatility and a generally negative trend. In 2020, economic profit was negative at -1,277 million US dollars, improving markedly in 2021 to -361 million US dollars and then turning positive in 2022 at 137 million US dollars. However, this positive outcome was not sustained, with economic profit declining sharply to -1,002 million US dollars in 2023 and remaining negative at -935 million US dollars in 2024. This indicates challenges in maintaining profitability despite revenue growth, potentially due to rising costs or diminishing returns on invested capital.

Supporting this observation, the economic profit margin mirrors the fluctuations seen in absolute economic profit. Starting at -6.54% in 2020, it narrows to -1.65% in 2021 and turns positive at 0.55% in 2022, suggesting improved capital efficiency and profitability relative to revenues. However, the margin again deteriorates significantly in 2023 to -4.15% and remains negative at -3.86% in 2024. This pattern highlights underlying issues impacting economic profit generation despite increased operating revenues.

Operating Revenues

Demonstrate steady growth over the period, indicating expanding business activities or volume.

Economic Profit

Exhibits unstable performance with a brief return to profitability in 2022, followed by large losses in subsequent years.

Economic Profit Margin

Reflects the fluctuations in economic profit and suggests challenges in sustaining efficient use of capital to generate excess returns.

Overall, while revenue growth is a positive sign, the company's ability to convert this growth into sustained economic profit remains problematic. The negative margins in recent years point to potential inefficiencies or cost pressures that warrant further investigation. Strategic focus may be needed on cost management and capital allocation to improve profitability metrics going forward.