Verizon Communications Inc. (NYSE:VZ)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrated a rising trend from 2020 to 2021, increasing from 24,311 million US dollars to 29,903 million US dollars. This was followed by a slight decline in 2022 to 28,039 million US dollars. In 2023, the NOPAT experienced a more pronounced decrease, falling to 19,450 million US dollars, before partially rebounding in 2024 to 24,675 million US dollars. Overall, the data indicate some volatility in operating profitability, with a peak in 2021 and a notable dip during 2023.

Invested Capital

Invested capital showed a consistent upward trajectory throughout the entire period under review. Starting at 247,730 million US dollars in 2020, it steadily increased each year to reach 307,881 million US dollars by 2024. This reflects ongoing capital investment or asset accumulation within the business, indicating expansion or reinvestment activities despite fluctuations in profitability.

Return on Invested Capital (ROIC)

The return on invested capital rose from 9.81% in 2020 to a peak of 10.31% in 2021, demonstrating improved efficiency in capital usage during this period. It then declined to 9.3% in 2022 and sharply decreased to 6.39% in 2023, coinciding with the steep drop in NOPAT. In 2024, ROIC improved moderately to 8.01%, though it remained below the earlier peak values. This pattern suggests that while the company increased its invested capital annually, its ability to generate returns on that capital weakened notably after 2021, with some recovery in the final reported year.

The analysis of the financial indicators over the five-year period reveals notable trends and fluctuations in operational efficiency, capital utilization, tax-related impacts, and profitability.

Operating Profit Margin (OPM)

The operating profit margin demonstrates variability across the timeframe. It increased from 22.93% in 2020 to a peak of 24.95% in 2021, indicating enhanced operational profitability. Subsequently, it declined to 23.74% in 2022 and experienced a more pronounced decrease to 17.33% in 2023. In 2024, there was a recovery to 22.57%, approaching the levels seen earlier in the period. This pattern suggests some operational challenges or cost pressures in 2023, followed by partial improvement.

Turnover of Capital (TO)

The turnover of capital ratio shows a gradual but consistent decline from 0.52 in 2020 to 0.44 in both 2023 and 2024. This indicates decreasing efficiency in the use of invested capital to generate sales or revenue, signaling potential challenges in asset utilization or slower revenue growth relative to the capital base.

1 – Effective Cash Tax Rate (CTR)

This metric remained relatively stable, with slight fluctuations ranging from 82.66% in 2020 to a high of 89.69% in 2021, then declining steadily to 81.1% by 2024. The high values imply a consistently low effective cash tax rate over the period, with minor improvements in tax cash outflows relative to profits toward the end of the period.

Return on Invested Capital (ROIC)

ROIC follows a generally declining trend from 9.81% in 2020 to a low point of 6.39% in 2023, indicating reduced effectiveness in generating returns from invested capital. Although there is a recovery to 8.01% in 2024, the return remains below the early years of the period analyzed. This decline mirrors the trends observed in operating margins and capital turnover, reflecting broader challenges in profitability and capital efficiency.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes demonstrated an overall fluctuating trend over the five-year period. It increased from $29,411 million in 2020 to a peak of $33,339 million in 2021, showing a positive growth trajectory initially. However, there was a decline to $32,490 million in 2022 and a more pronounced decrease to $23,224 million in 2023. Notably, the figure rebounded somewhat in 2024, rising to $30,425 million, but still remained below the 2021 peak.

Operating Revenues

Operating revenues steadily increased from $128,292 million in 2020 to $136,835 million in 2022, reflecting consistent revenue growth during this period. However, a slight decline occurred in 2023, with revenues falling to $133,974 million, followed by a modest recovery to $134,788 million in 2024. Despite these minor setbacks, the general trend indicates stable revenue levels with small fluctuations towards the later years.

Operating Profit Margin (OPM)

The operating profit margin, expressed as a percentage, showed an initial improvement, rising from 22.93% in 2020 to 24.95% in 2021. This was followed by a decrease to 23.74% in 2022, indicating some pressure on profitability. A significant contraction in margin occurred in 2023, dropping sharply to 17.33%, suggesting increased costs or reduced operational efficiency that year. The margin partially recovered in 2024, improving to 22.57%, although it did not return to the higher levels seen earlier in the period.

Summary of Financial Performance Trends

Across the five years, the company experienced an overall growth in revenues with minor fluctuations, peaking in 2022. Profitability, as measured by both NOPBT and operating profit margin, showed variability with a peak in 2021, followed by declines particularly in 2023. The sharp margin decline in 2023 may warrant further investigation into cost management or operational challenges during that year. The recovery in 2024's profit levels and margins suggests a potential stabilization or improvement in financial health after the previous downturn.

Operating Revenues

Operating revenues exhibited a generally upward trajectory from 2020 to 2022, increasing from 128,292 million US dollars to 136,835 million US dollars. However, a slight decline was observed in 2023, with revenues decreasing to 133,974 million US dollars. The subsequent year, 2024, showed a modest recovery, with revenues rising marginally to 134,788 million US dollars. Overall, the revenue growth over the five-year period was positive but demonstrated some fluctuations after 2022.

Invested Capital

Invested capital consistently increased throughout the entire period from 2020 to 2024. Starting at 247,730 million US dollars in 2020, it rose significantly to 290,004 million US dollars in 2021, followed by more gradual increases in the following years, reaching 307,881 million US dollars by the end of 2024. This suggests ongoing capital investment and expansion efforts.

Turnover of Capital (TO)

The turnover of capital ratio demonstrated a declining trend over the period. From 0.52 in 2020, it fell to 0.46 in 2021 and showed a steady decrease thereafter, stabilizing at 0.44 in both 2023 and 2024. This decreasing ratio indicates a reduction in the efficiency with which the capital invested is generating revenues, reflecting potential challenges in capital utilization or asset productivity as the invested capital base expanded.

Summary of Trends and Insights

The data reveals that while the company managed to increase its operating revenues overall, the growth rate slowed after 2022 and experienced minor volatility. Concurrently, there was a continuous rise in invested capital, suggesting ongoing investments in assets or operations. The declining turnover of capital ratio points toward decreasing capital efficiency, as the company generated less revenue per unit of invested capital over time. This combination may signal that the increased capital expenditures have not yet translated into proportionate revenue growth, warranting further analysis into asset utilization and operational effectiveness.

The financial data over the five-year period reveals notable fluctuations in cash operating taxes, net operating profit before taxes (NOPBT), and the effective cash tax rate (CTR).

Cash Operating Taxes

The cash operating taxes demonstrate volatility, with an initial decrease from 5,100 million US$ in 2020 to 3,436 million US$ in 2021, followed by a rise to 4,451 million US$ in 2022. The amount then declined again to 3,774 million US$ in 2023 before reaching the highest value of 5,750 million US$ in 2024. This pattern suggests variable tax expenses influenced by either changes in taxable income, tax regulations, or tax planning strategies.

Net Operating Profit Before Taxes (NOPBT)

NOPBT increased from 29,411 million US$ in 2020 to its peak at 33,339 million US$ in 2021, showing growth in operational profitability. However, a slight decrease occurred in 2022 to 32,490 million US$. The most significant decline was observed in 2023 when NOPBT reduced sharply to 23,224 million US$. This was followed by a notable recovery in 2024, with NOPBT rising to 30,425 million US$. Overall, this trend indicates a period of operational performance challenges in 2023, with partial recovery thereafter.

Effective Cash Tax Rate (CTR)

The effective cash tax rate exhibited a declining trend from 17.34% in 2020 to the lowest rate of 10.31% in 2021, indicating a reduced tax burden relative to operating profits during that year. The rate then moderately increased to 13.7% in 2022 and further to 16.25% in 2023. In 2024, the effective tax rate rose to 18.9%, the highest level observed in the period, suggesting that a greater proportion of operating profit was paid as cash taxes relative to previous years.

In summary, the period was characterized by variable profitability and tax expense patterns. The peak operating profit in 2021 coincided with a lower effective tax rate and reduced cash taxes. The sharp decline in profitability in 2023 was accompanied by a moderate increase in the tax rate and a lower level of cash taxes paid, potentially reflecting tax relief or deferred tax payments. The rebound in profitability in 2024 was coupled with the highest cash tax payments and an elevated effective tax rate, implying a normalizing or tightening tax environment relative to operating performance.