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.
Economic Profit
Keurig Dr Pepper Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,588 – 10.82% × 44,109 = -2,185
An evaluation of the economic value added indicates that the entity consistently operated with a negative economic profit from 2018 through 2021. However, a positive trajectory is evident as the magnitude of the economic loss decreased steadily over the observed period.
- Net Operating Profit After Taxes (NOPAT)
- A strong upward trend is observed in NOPAT, which increased from US$ 903 million in 2018 to US$ 2,588 million in 2021. This substantial growth indicates a significant expansion in the core operational profitability of the business over the four-year window.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable, fluctuating slightly around the US$ 44 billion range. Simultaneously, the cost of capital exhibited a gradual and consistent increase from 9.94% in 2018 to 10.82% in 2021, effectively raising the hurdle rate required to generate economic value.
- Economic Profit Performance
- The economic profit improved from a deficit of US$ 3,536 million in 2018 to US$ 2,185 million in 2021. This narrowing of the deficit is primarily attributable to the growth in NOPAT, which more than offset the rising cost of capital. While the entity has not yet achieved a positive economic profit, the trend demonstrates a consistent movement toward value creation.
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Net Operating Profit after Taxes (NOPAT)
Keurig Dr Pepper Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in product warranties.
4 Addition of increase (decrease) in restructuring liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to KDP.
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 684 × 4.30% = 29
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 529 × 21.00% = 111
8 Addition of after taxes interest expense to net income attributable to KDP.
The financial performance over the four-year period demonstrates a notably positive trend in profitability measures.
- Net Income Attributable to KDP
- The net income attributable to the company increased substantially, starting at 586 million US dollars in 2018 and rising to 2,146 million US dollars by the end of 2021. This represents a more than threefold increase over the period, with a particularly strong jump between 2020 and 2021, where net income grew by approximately 62%. The steady increases in the prior years reflect consistent growth in profitability.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibited strong growth, increasing from 903 million US dollars in 2018 to 2,588 million US dollars in 2021. The year-over-year increases indicate robust operating profitability improvements, with the most significant rise observed in the last year, mirroring the trend seen in net income. The growth rate from 2020 to 2021 was approximately 45%, demonstrating enhanced operational efficiency and effective tax management contributing to increased net operating profits.
Overall, the data indicates significant and sustained financial improvement in key profitability metrics, with the largest gains occurring in the most recent year. This suggests successful management strategies and operational execution leading to stronger earnings and operational results over time.
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Cash Operating Taxes
Keurig Dr Pepper Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data reveals the trends in tax-related expenses over the four-year period ending December 31, 2021. There is an upward trajectory in both the provision for income taxes and cash operating taxes, though the growth rates and amounts vary between these two categories.
- Provision for Income Taxes
- This figure rose from 202 million US dollars in 2018 to 653 million US dollars in 2021. The largest year-over-year increase occurred between 2020 and 2021, with an increase of 225 million US dollars. The provision more than tripled over the four years, indicating a substantial increase in income tax expenses recognized during this period.
- Cash Operating Taxes
- Cash operating taxes demonstrated a consistent upward trend, increasing from 381 million US dollars in 2018 to 733 million US dollars in 2021. The increase across the period was approximately 92%, with the most significant jump occurring between 2018 and 2019 (224 million US dollars). The growth in cash taxes paid suggests rising tax obligations or improved tax payment alignments within the company.
Overall, the data reflects a significant increase in both accrued income tax provisions and actual cash tax payments over the examined period. The increases may be indicative of growing profitability, changes in tax regulation, or alterations in financial strategies related to tax expenses. The sharper rise in the provision for income taxes in the final year suggests a possible anticipation of higher tax liability.
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Invested Capital
Keurig Dr Pepper Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 product warranties.
5 Addition of restructuring liabilities.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction-in-progress.
The financial data reveals a consistent trend in the company's capital structure over the analyzed period from 2018 to 2021. There is a clear decline in the total reported debt and leases, indicating a steady reduction in liabilities.
- Total reported debt & leases
- Starting at 16,236 million US dollars in 2018, this figure decreases each year, reaching 13,266 million US dollars by the end of 2021. This downward trend suggests a strategic effort to reduce financial leverage or improve the balance sheet strength.
- Stockholders’ equity
- Stockholders' equity shows a gradual increase across the same timeframe, moving from 22,533 million US dollars in 2018 to 24,972 million US dollars in 2021. This incremental rise indicates growth in the company’s net assets, which may reflect retained earnings accumulation or capital infusions.
- Invested capital
- Invested capital remains relatively stable, fluctuating slightly without a clear upward or downward trajectory. It begins at 44,635 million US dollars in 2018, decreases marginally to 43,835 million US dollars in 2020, and recovers slightly to 44,109 million US dollars in 2021. This stability may imply consistent investment levels despite changing debt and equity components.
Overall, the reduction in debt combined with the increase in equity suggests an improvement in the financial robustness and potentially a lower risk profile. The steadiness of invested capital implies that the company maintained its asset base, possibly reflecting controlled investment or capital expenditure activities balanced by depreciation or disposals.
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Cost of Capital
Keurig Dr Pepper Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 51,976) | 51,976) | ÷ | 66,587) | = | 0.78 | 0.78 | × | 13.04% | = | 10.18% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 13,927) | 13,927) | ÷ | 66,587) | = | 0.21 | 0.21 | × | 3.67% × (1 – 21.00%) | = | 0.61% | ||
| Operating lease liability4 | 684) | 684) | ÷ | 66,587) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 66,587) | 1.00 | 10.82% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,428) | 43,428) | ÷ | 60,119) | = | 0.72 | 0.72 | × | 13.04% | = | 9.42% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 16,039) | 16,039) | ÷ | 60,119) | = | 0.27 | 0.27 | × | 4.00% × (1 – 21.00%) | = | 0.84% | ||
| Operating lease liability4 | 652) | 652) | ÷ | 60,119) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 60,119) | 1.00 | 10.30% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,733) | 39,733) | ÷ | 56,055) | = | 0.71 | 0.71 | × | 13.04% | = | 9.24% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 15,826) | 15,826) | ÷ | 56,055) | = | 0.28 | 0.28 | × | 3.90% × (1 – 21.00%) | = | 0.87% | ||
| Operating lease liability4 | 496) | 496) | ÷ | 56,055) | = | 0.01 | 0.01 | × | 4.60% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 56,055) | 1.00 | 10.15% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 35,363) | 35,363) | ÷ | 51,421) | = | 0.69 | 0.69 | × | 13.04% | = | 8.97% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 15,812) | 15,812) | ÷ | 51,421) | = | 0.31 | 0.31 | × | 3.92% × (1 – 21.00%) | = | 0.95% | ||
| Operating lease liability4 | 246) | 246) | ÷ | 51,421) | = | 0.00 | 0.00 | × | 6.18% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 51,421) | 1.00 | 9.94% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Keurig Dr Pepper Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | (2,185) | (2,729) | (2,726) | (3,536) | |
| Invested capital2 | 44,109) | 43,835) | 44,138) | 44,635) | |
| Performance Ratio | |||||
| Economic spread ratio3 | -4.95% | -6.23% | -6.17% | -7.92% | |
| Benchmarks | |||||
| Economic Spread Ratio, Competitors4 | |||||
| Coca-Cola Co. | 5.60% | — | — | — | |
| Mondelēz International Inc. | -0.54% | — | — | — | |
| PepsiCo Inc. | 5.13% | — | — | — | |
| Philip Morris International Inc. | 26.47% | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,185 ÷ 44,109 = -4.95%
4 Click competitor name to see calculations.
An analysis of economic value added metrics from 2018 to 2021 reveals a consistent trend of recovery, although the organization continued to operate with a negative economic profit throughout the period. The narrowing of the economic deficit indicates a gradual improvement in the ability to generate returns relative to the cost of capital.
- Economic Profit Trends
- Economic profit remained negative across the observed timeframe but demonstrated a general upward trajectory. A significant improvement occurred between 2018 and 2019, with the loss decreasing from US$ 3,536 million to US$ 2,726 million. After a period of relative stability in 2020, the loss further narrowed to US$ 2,185 million by December 31, 2021, representing a total reduction in economic loss of approximately 38% over the four-year period.
- Invested Capital Stability
- Invested capital remained relatively stagnant, fluctuating within a narrow range between US$ 43,835 million and US$ 44,635 million. A slight decline was observed through 2020, followed by a marginal increase in 2021 to US$ 44,109 million. This stability suggests that the improvements in economic profit were driven by operational performance rather than a significant contraction of the capital base.
- Economic Spread Ratio Performance
- The economic spread ratio showed a steady move toward positive territory, improving from -7.92% in 2018 to -4.95% in 2021. While the negative values indicate that the cost of capital continued to exceed the return on invested capital, the consistent compression of this spread reflects an increasing efficiency in capital utilization and a trend toward future value creation.
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Economic Profit Margin
Keurig Dr Pepper Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | (2,185) | (2,729) | (2,726) | (3,536) | |
| Net sales | 12,683) | 11,618) | 11,120) | 7,442) | |
| Performance Ratio | |||||
| Economic profit margin2 | -17.23% | -23.49% | -24.51% | -47.51% | |
| Benchmarks | |||||
| Economic Profit Margin, Competitors3 | |||||
| Coca-Cola Co. | 11.64% | — | — | — | |
| Mondelēz International Inc. | -1.16% | — | — | — | |
| PepsiCo Inc. | 4.51% | — | — | — | |
| Philip Morris International Inc. | 24.57% | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -2,185 ÷ 12,683 = -17.23%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2018 to 2021 reveals a consistent trend toward improved economic efficiency, despite the persistence of negative economic profit. While the company has not yet achieved a positive economic value added state, the narrowing of the deficit indicates a progressive recovery in value creation capabilities.
- Net Sales Growth
- A strong upward trajectory in revenue is observed, with net sales increasing from 7,442 million US dollars in 2018 to 12,683 million US dollars in 2021. The most significant expansion occurred between 2018 and 2019, representing a substantial increase in the company's market scale and top-line performance.
- Economic Profit Trajectory
- Economic profit remained negative throughout the four-year period, indicating that the returns generated were insufficient to cover the cost of capital. However, the magnitude of the economic loss decreased steadily from 3,536 million US dollars in 2018 to 2,185 million US dollars in 2021, signaling a reduction in value destruction.
- Economic Profit Margin Improvement
- The economic profit margin showed significant recovery, moving from -47.51% in 2018 to -17.23% in 2021. This trend suggests that the increase in net sales, combined with operational adjustments, is effectively reducing the gap between actual profits and the required return on capital.
The convergence of increasing sales and a decreasing economic profit deficit suggests an improving operational leverage. The steady migration of the economic profit margin toward zero indicates that the business is trending toward a threshold of positive economic value added.
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