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.
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United Parcel Service Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Net Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
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Economic Profit
United Parcel Service Inc., economic profit calculation
US$ in millions
| 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 NOPAT exhibits significant fluctuations over the analyzed period. There is a sharp increase from 1,136 million US dollars in 2020 to 15,125 million US dollars in 2021, indicating a marked improvement in operational profitability. However, subsequent years show a declining trend, dropping to 12,726 million in 2022, then further decreasing to 7,622 million in 2023 and 6,582 million in 2024. This suggests diminishing operating efficiency or increased costs impacting net profits after taxes in recent years.
- Cost of Capital
- The cost of capital exhibits a gradual increase from 12.42% in 2020 to a peak of 13.11% in 2022, followed by a slight decrease to 12.63% in 2023 and 12.35% in 2024. This indicates a relatively stable cost environment with minor fluctuations, reflecting possible changes in market conditions, risk premiums, or capital structure over time.
- Invested Capital
- Invested capital shows a consistent upward trend. Starting from 33,181 million US dollars in 2020, it rises to 44,396 million in 2021 and marginally increases in subsequent years, reaching 48,150 million by 2024. This steady growth suggests ongoing investments and asset base expansion, potentially to support business operations or growth initiatives.
- Economic Profit
- Economic profit displays a volatile pattern. The company reported a negative economic profit of -2,984 million US dollars in 2020, indicating value destruction. This turned positive sharply in 2021 at 9,364 million, followed by a decline to 6,855 million in 2022. The trend continues downward to 1,881 million in 2023 and further down to 636 million in 2024. While still positive after 2020, the downward slope points to diminishing returns relative to the cost of capital and invested capital over time.
Net Operating Profit after Taxes (NOPAT)
United Parcel Service Inc., NOPAT calculation
US$ in millions
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
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
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
| 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 showed significant volatility over the periods analyzed. In 2020, the company experienced a substantial economic loss of 2984 million US dollars. However, a strong recovery occurred in 2021, with economic profit surging to 9364 million US dollars. This positive trend continued into 2022, albeit at a reduced level of 6855 million US dollars. Subsequent years 2023 and 2024 saw a sharp decline in economic profit to 1881 million and further down to 636 million US dollars, respectively, indicating a notable deceleration in profitability after 2022.
- Invested Capital
- Invested capital displayed a consistent upward trend throughout the five-year period. Starting at 33181 million US dollars in 2020, the invested capital increased steadily, rising to 44396 million in 2021 and maintaining incremental growth each year thereafter, reaching 48150 million US dollars by the end of 2024. This trend suggests ongoing capital investments or accumulation of assets over time.
- Economic Spread Ratio
- The economic spread ratio exhibited a pattern of recovery followed by decline over the analyzed periods. The ratio was negative in 2020 at -8.99%, indicating that returns were below the cost of capital. In 2021, it improved dramatically to 21.09%, signifying strong value creation. Thereafter, the ratio decreased to 15.31% in 2022 and experienced a marked drop to 4.14% and 1.32% in 2023 and 2024, respectively. This decline highlights diminishing returns on invested capital relative to its cost.
- Overall Analysis
- Combining all indicators, the company experienced a significant turnaround from 2020 losses to peak economic profitability in 2021. Despite continuous growth in invested capital, returns on this investment and economic profit have both contracted notably since 2021 and 2022. This suggests that while the company has been increasing its capital base, its ability to generate economic value per invested dollar has weakened markedly in recent years. The downward trend in both economic profit and economic spread ratio points towards challenges in sustaining high profitability levels amid rising capital investment.
Economic Profit Margin
United Parcel Service Inc., economic profit margin calculation, comparison to benchmarks
| 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 exhibited an overall increasing trend from 2020 to 2022, rising from $84,628 million in 2020 to $100,338 million in 2022. However, in the subsequent years, 2023 and 2024, revenue showed a decline and stagnation, slightly dropping to $90,958 million in 2023 and remaining almost flat at $91,070 million in 2024.
- Economic Profit Trends
- Economic profit displayed significant volatility over the analyzed period. In 2020, economic profit was deeply negative at -$2,984 million, indicating a loss beyond the cost of capital. A strong recovery occurred in 2021, with economic profit rising to $9,364 million, followed by a decrease in 2022 to $6,855 million. In 2023 and 2024, economic profit continued to decrease, reaching $1,881 million and then $636 million, respectively, showing a downward trend in profitability after the peak in 2021.
- Economic Profit Margin Trends
- The economic profit margin mirrored the pattern observed in economic profit, starting with a negative margin of -3.53% in 2020 indicating that the company was not generating returns above its economic cost of capital. In 2021, the margin increased significantly to 9.62%, marking a period of strong economic profitability. Subsequently, the margin decreased steadily to 6.83% in 2022, then dropped more sharply to 2.07% in 2023 and 0.7% in 2024, indicating a substantial reduction in relative economic profitability.
- Summary and Insights
- The data reveals a period of recovery and strong profitability in 2021 following a loss-making year in 2020. However, after 2021, both economic profit and economic profit margin showed declining trends despite some revenue stability after 2022. This suggests challenges in maintaining profitability despite relatively steady revenue levels. The decreasing economic profit margin and profit amounts indicate tightening margins or increased costs that could be impacting overall economic returns. The nearly flat revenue in the last two recorded years alongside falling economic profit may warrant further investigation into cost structure, pricing strategies, or competitive pressures affecting profitability.