Stock Analysis on Net

United Parcel Service Inc. (NYSE:UPS)

$24.99

Economic Value Added (EVA)

Microsoft Excel

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.

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Economic Profit

United Parcel Service Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 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), 10-K (reporting date: 2020-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =


Net Operating Profit After Taxes (NOPAT)
The net operating profit after taxes exhibited a significant increase from 1,136 million in 2020 to a peak of 15,125 million in 2021. Subsequently, there was a decline to 12,726 million in 2022, followed by a more pronounced decrease to 7,622 million in 2023 and further to 6,582 million in 2024. This trend indicates a strong performance spike in 2021, with a continuous reduction in profitability in the following years.
Cost of Capital
The cost of capital ranged between 12.31% and 13.07% over the five-year period. It showed a gradual increase from 12.38% in 2020 to 13.07% in 2022, before declining to 12.59% in 2023 and further to 12.31% in 2024. The cost of capital remained relatively stable, with minor fluctuations throughout the timeframe.
Invested Capital
Invested capital increased steadily over the five years, starting at 33,181 million in 2020 and rising to 48,150 million by 2024. The growth was consistent, with particularly notable increases from 2020 to 2021 and a continued upward trend in subsequent years, reflecting ongoing investment or asset accumulation.
Economic Profit
Economic profit displayed a marked improvement from a negative 2,972 million in 2020 to a positive 9,381 million in 2021. However, it declined thereafter, dropping to 6,872 million in 2022 and continuing downward to 1,898 million in 2023 and 654 million in 2024. Despite remaining positive after 2020, the decreasing economic profit suggests diminishing returns on invested capital and a reduction in value creation over the latter periods.

Net Operating Profit after Taxes (NOPAT)

United Parcel Service Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for credit losses2
Increase (decrease) in equity equivalents3
Interest expense
Interest expense, operating lease liability4
Adjusted interest expense
Tax benefit of interest expense5
Adjusted interest expense, after taxes6
(Gain) loss on marketable securities
Investment income, before taxes
Tax expense (benefit) of investment income7
Investment income, after taxes8
Net operating profit after taxes (NOPAT)

Based on: 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), 10-K (reporting date: 2020-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for credit losses.

3 Addition of increase (decrease) in equity equivalents to net income.

4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

6 Addition of after taxes interest expense to net income.

7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

8 Elimination of after taxes investment income.


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.

Cash Operating Taxes

United Parcel Service Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Income tax expense
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 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), 10-K (reporting date: 2020-12-31).


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.

Invested Capital

United Parcel Service Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Current maturities of long-term debt, commercial paper and finance leases
Long-term debt and finance leases, excluding current maturities
Operating lease liability1
Total reported debt & leases
Equity for controlling interests
Net deferred tax (assets) liabilities2
Allowance for credit losses3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Noncontrolling interests
Adjusted equity for controlling interests
Construction-in-progress6
Marketable securities7
Invested capital

Based on: 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), 10-K (reporting date: 2020-12-31).

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 equity for controlling interests.

5 Removal of accumulated other comprehensive income.

6 Subtraction of construction-in-progress.

7 Subtraction of marketable securities.


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.

Cost of Capital

United Parcel Service Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current maturities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current maturities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current maturities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current maturities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current maturities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current maturities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current maturities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current maturities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt, including current maturities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt, including current maturities. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

United Parcel Service Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
FedEx Corp.
Uber Technologies Inc.
Union Pacific Corp.
United Airlines Holdings Inc.

Based on: 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), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


Economic Profit
The economic profit exhibited significant volatility over the examined period. It started with a notable negative value of -2,972 million US dollars at the end of 2020, indicating a loss in economic value during that year. This was followed by a strong recovery in 2021, reaching a peak of 9,381 million US dollars. Subsequently, economic profit declined over the next three years, dropping to 6,872 million in 2022, 1,898 million in 2023, and further down to 654 million in 2024. The trend suggests a decreasing capacity of the company to generate economic profit after a high point in 2021, signaling challenges in maintaining profitability.
Invested Capital
The invested capital has consistently increased throughout the period, starting at 33,181 million US dollars at the end of 2020 and growing to 48,150 million by the end of 2024. The growth appears steady, with increases each year, although the rate of increase seems moderate in recent years compared to the initial jump from 2020 to 2021. This upward trend indicates ongoing investments or accumulation of assets over time.
Economic Spread Ratio
The economic spread ratio followed a pattern similar to economic profit but with more pronounced fluctuations. In 2020, the ratio was significantly negative at -8.96%, reflecting an economic loss relative to the invested capital. It then surged dramatically to 21.13% in 2021, indicating strong economic returns. Afterward, the spread ratio diminished substantially in the subsequent years to 15.35% in 2022, 4.17% in 2023, and finally 1.36% in 2024. This decreasing trend shows declining effectiveness in generating returns above the cost of capital despite the increase in invested capital.

Economic Profit Margin

United Parcel Service Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit1
Revenue
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
FedEx Corp.
Uber Technologies Inc.
Union Pacific Corp.
United Airlines Holdings Inc.

Based on: 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), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =

3 Click competitor name to see calculations.


Revenue Trends
Revenue showed an overall increasing trend from 2020 to 2022, rising from $84,628 million to $100,338 million. However, in 2023 and 2024, revenue declined and then stabilized, reaching $90,958 million in 2023 and $91,070 million in 2024, indicating a contraction after the peak in 2022.
Economic Profit Trends
The economic profit experienced significant fluctuations during the period. The year 2020 recorded a substantial economic loss of -$2,972 million. In contrast, 2021 saw a notable recovery with a positive economic profit of $9,381 million. Subsequently, although economic profit remained positive in 2022 at $6,872 million, it declined sharply in 2023 and continued downward in 2024, falling to $1,898 million and $654 million, respectively.
Economic Profit Margin Trends
The economic profit margin mirrored the pattern observed in economic profit, starting with a negative margin of -3.51% in 2020. This was followed by a strong positive margin of 9.64% in 2021. The margin then declined consistently over the next three years, decreasing to 6.85% in 2022, 2.09% in 2023, and further to 0.72% in 2024.
Overall Insights
The data reveals a recovery phase post-2020, with improvements in economic profit and margin aligned with revenue growth through 2021 and early 2022. However, despite relatively stable revenue figures in 2023 and 2024 compared to 2022, profitability measures weakened significantly. This suggests rising costs, reduced operational efficiency, or other factors negatively impacting economic profit despite revenue stability. The decreasing economic profit margin particularly highlights declining returns on each dollar of revenue in the most recent years.