United Parcel Service Inc. (NYSE:UPS)

The financial data reveals notable fluctuations and trends over the five-year period under review.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a significant increase from 1,136 million USD in 2020 to a peak of 15,125 million USD in 2021. However, thereafter it declined steadily, falling to 12,726 million USD in 2022, 7,622 million USD in 2023, and further to 6,582 million USD in 2024. This downward trajectory after 2021 indicates reduced profitability or increased operational challenges in the later years.

Cost of Capital

The cost of capital demonstrated a gradual increase from 12.55% in 2020 to a high of 13.25% in 2022. It then slightly decreased to 12.76% in 2023 and further to 12.47% in 2024. This pattern suggests that the firm's risk profile or market conditions worsened until 2022 but improved modestly thereafter.

Invested Capital

Invested capital exhibited continuous growth across the period, rising from 33,181 million USD in 2020 to 48,150 million USD in 2024. This steady increase indicates ongoing investments in the company’s operations or assets, reflecting expansion or modernization efforts despite the dip in profitability.

Economic Profit

Economic profit was negative at -3,027 million USD in 2020, improved substantially to a strong positive of 9,303 million USD in 2021, and then declined progressively to 6,793 million USD in 2022, 1,822 million USD in 2023, and 575 million USD in 2024. The decline after 2021 signals diminishing returns above the cost of capital, suggesting that the higher invested capital and declining profitability reduced value creation.

In summary, despite an initial strong performance characterized by increased operating profits and economic profit in 2021, the company experienced a downward trend in profitability and value generation from 2022 onward. While invested capital continued to grow, indicating ongoing investments, the cost of capital rose initially and then decreased slightly. The persistent decline in both NOPAT and economic profit after 2021 suggests operational or market challenges impacting financial performance and returns in recent years.

Net Income Trend

The net income shows significant volatility over the analyzed period. It started relatively low at 1,343 million USD in 2020, then experienced a sharp increase to 12,890 million USD in 2021. Following that peak, net income declined to 11,548 million USD in 2022, and continued to decrease more substantially in 2023 and 2024, reaching 6,708 million USD and 5,782 million USD respectively. This indicates a strong peak in profitability in 2021 followed by a steady decline, though it remains above the initial 2020 level.

NOPAT (Net Operating Profit After Taxes) Trend

The NOPAT also exhibits a similar pattern to net income, beginning at 1,136 million USD in 2020. Thereafter, it rose markedly to 15,125 million USD in 2021, representing the highest value within the period. It then experienced a decrease, falling to 12,726 million USD in 2022, and continued to decline in the subsequent years to 7,622 million USD in 2023 and 6,582 million USD in 2024. Despite the decline after 2021, the NOPAT levels in the later years remain notably higher than those at the start of the period.

Overall Pattern

Both key profitability metrics—net income and NOPAT—reflect a peak in 2021 followed by a downward trend through 2024. The declines from the peak values are quite pronounced, suggesting that the company faced challenges impacting profitability after 2021. Nevertheless, profitability metrics have not returned to the low levels seen in 2020, indicating retained periodic strength despite the decreases.

Income Tax Expense

The income tax expense exhibits significant volatility across the observed periods. There is a substantial increase from 501 million USD in 2020 to 3,705 million USD in 2021, indicating a sharp rise in tax liabilities or taxable income during that year. Subsequently, the tax expense decreases slightly but remains elevated at 3,277 million USD in 2022. Following 2022, a notable downward trend occurs with the tax expense falling to 1,865 million USD in 2023 and further down to 1,660 million USD in 2024. This pattern suggests a peak in tax expense in the early years followed by a considerable reduction towards the later years.

Cash Operating Taxes

Cash operating taxes show a more consistent upward movement initially, rising from 1,520 million USD in 2020 to 2,219 million USD in 2021, and further increasing to 2,913 million USD in 2022. Despite the initial rise, the trend reverses after 2022, with cash operating taxes decreasing to 1,861 million USD in 2023. However, there is a slight increase again in 2024 to 1,889 million USD. Overall, cash operating taxes demonstrate a growing burden through the first three years, followed by a reduction and a minor rebound in the final year.

Comparison and Insights

While both income tax expense and cash operating taxes start at relatively lower levels in 2020 and rise significantly in the subsequent years, income tax expense peaks higher and declines more sharply than cash operating taxes. The divergence in their trajectories after 2022 indicates possible changes in tax strategies, timing differences between accrued tax expense and actual cash paid, or adjustments related to deferred tax assets or liabilities. The fluctuations suggest a dynamic tax environment with a shift toward lower reported tax expenses and cash taxes in the recent years, potentially reflecting changes in profitability, tax planning measures, or regulatory impacts.

Total reported debt & leases

The total reported debt and leases exhibit a fluctuating but generally declining trend over the five-year period. Starting from $27,754 million at the end of 2020, the figure decreased to $23,521 million by the end of 2022, followed by a rise to $26,729 million in 2023, before dipping again to $25,652 million in 2024. This pattern suggests some variability in debt management, possibly influenced by financing activities or capital expenditure requirements.

Equity for controlling interests

Equity for controlling interests shows a significant increase between 2020 and 2021, rising sharply from $657 million to $14,253 million. This upward trajectory continued, albeit at a slower pace, reaching $19,786 million in 2022. However, equity decreased moderately in the subsequent years to $17,306 million in 2023 and further to $16,718 million in 2024. The initial surge might reflect strong retained earnings or capital injections, while the later decline could suggest share repurchases, dividends, or losses impacting shareholder equity.

Invested capital

Invested capital demonstrates a consistent upward trend throughout the period. Starting at $33,181 million in 2020, it increased steadily each year, reaching $44,780 million in 2022 and continuing to rise to $48,150 million by the end of 2024. This gradual growth indicates ongoing investment in the company’s assets, potentially reflecting expansion or enhancement of operational capacity.

The analysis of the financial data reveals notable fluctuations in economic profit, invested capital, and economic spread ratio over the five-year period.

Economic Profit

Economic profit exhibited a significant turnaround from 2020 to 2021, shifting from a substantial loss of −$3,027 million to a profit of $9,303 million. Following this peak in 2021, economic profit declined sharply in 2022 to $6,793 million and continued a downward trend in subsequent years, reaching $1,822 million in 2023 and further decreasing to $575 million in 2024. This trend indicates a peak in profitability in 2021, followed by a steady reduction in the ability to generate returns exceeding the cost of capital.

Invested Capital

Invested capital increased steadily throughout the period under review, starting at $33,181 million in 2020 and growing to $48,150 million by 2024. The gradual rise suggests ongoing investments or asset accumulation, reflecting potential efforts to expand or maintain operations.

Economic Spread Ratio

The economic spread ratio, a measure of the return over the cost of capital expressed as a percentage, transitioned from a negative value of −9.12% in 2020 to a high positive value of 20.95% in 2021. Subsequently, this ratio declined to 15.17% in 2022 and continued falling sharply to 4.01% in 2023 and 1.19% in 2024. The decline mirrors the trend in economic profit and indicates diminishing efficiency in generating returns above capital costs.

In summary, while invested capital steadily increased, the company's economic profit and economic spread ratio both demonstrated a peak in 2021 and thereafter showed considerable decreases. This suggests that although the company continued to invest or maintain its capital base, its effectiveness in converting these investments into value-added profits diminished notably after 2021.

Revenue Trends

The revenue displayed a steady upward trend from 2020 to 2022, increasing from 84,628 million US dollars to a peak of 100,338 million US dollars. However, in the subsequent years 2023 and 2024, the revenue showed a slight decline and stabilization, recording 90,958 million and 91,070 million US dollars respectively. This suggests a period of growth followed by a plateau or minor reduction in sales or service income.

Economic Profit Analysis

Economic profit exhibited significant fluctuations across the five-year period. Initially, in 2020, the company experienced a notable economic loss of 3,027 million US dollars. This was followed by a sharp recovery and peak economic profit of 9,303 million US dollars in 2021. Subsequently, economic profit declined to 6,793 million in 2022, and further dropped consistently in 2023 and 2024 to 1,822 million and 575 million respectively. This trend indicates early financial challenges followed by a strong rebound, but the profit-generating capacity weakened after 2021, potentially indicating rising costs or reduced operational efficiency.

Economic Profit Margin Evaluation

The economic profit margin showed a similar volatility pattern as overall economic profit. Starting with a negative margin of -3.58% in 2020, it soared to a strong positive 9.56% in 2021, reflecting improved profitability relative to revenue. After that, it diminished notably to 6.77% in 2022 and further slipped to 2% and 0.63% in 2023 and 2024 respectively. These figures suggest that while the company turned profitable on an economic basis after 2020, the efficiency in generating economic profit relative to revenue has steadily decreased since its peak.

Overall Financial Performance Summary

The financial performance over the five years reflects a recovery phase post-2020 economic challenges, followed by diminishing profitability despite relatively stable revenue figures in the latter years. The data implies that although the company was able to increase its revenue and rebound from prior losses, economic profit and its margin experienced considerable contraction, indicating potential pressures in cost management or competitive dynamics affecting profit levels.