Chevron Corp. (NYSE:CVX)

The financial data indicates notable volatility in the company's profitability and economic performance over the five-year period. The Net Operating Profit After Taxes (NOPAT) demonstrates a significant recovery following a substantial loss in 2020. Specifically, NOPAT transitions from a negative value to positive values in 2021 and 2022, with a peak in 2022. However, it declines in 2023 and stabilizes slightly in 2024, remaining positive but notably lower than the 2022 peak.

The cost of capital exhibits a gradual increase from 13.21% in 2020 to a peak of 15.03% in 2022, then experiences a minor decrease but remains elevated above 14.8% through 2024. This upward trend in the cost of capital suggests an increasing expense associated with financing and investment risks during the period analyzed.

Invested capital shows some fluctuations but generally remains around the 200 billion US dollars mark, with a slight increase peaking in 2022 and 2023, followed by a marginal reduction in 2024. This stability in invested capital indicates consistent asset or capital base maintenance with minor adjustments year-over-year.

Economic profit, which reflects value creation beyond the cost of capital, is negative for the majority of the years under review except for 2022. The sharp negative economic profit in 2020 aligns with the significant negative NOPAT observed in the same year. While economic profit improves markedly by 2022 into positive territory, it subsequently declines again in 2023 and 2024, ending the period with substantial negative values, indicating an erosion of value relative to the cost of capital in the latter years.

Profitability Trends

NOPAT recovers strongly from a negative position in 2020 to positive peaks in 2021 and 2022, but then declines in subsequent years, suggesting fluctuating operational efficiency or market conditions.

Cost of Capital Movement

The rising cost of capital over the period reflects increasing financing costs or heightened investment risk, which likely impacts profitability and valuation metrics.

Capital Investment Stability

Invested capital remains relatively stable with minor variation, indicating consistent asset base and capital structure management.

Value Creation Analysis

Economic profit data indicates periods of both value destruction and creation, with significant losses during 2020, partial recovery in 2022, but subsequent losses suggesting challenges in generating returns above the cost of capital in most years.

Overall, the company experiences cyclical performance with significant challenges in 2020, improvement in mid-period, and a return to less favorable economic conditions by 2023 and 2024. The cost dynamics and capital investment patterns imply that despite operational recovery, the elevated cost of capital and resulting economic profit losses pose concerns regarding sustainable value creation.

The data reveals notable fluctuations in profitability metrics over the observed five-year period. Initially, both net income and net operating profit after taxes (NOPAT) were negative in 2020, indicating a challenging financial environment or operational difficulties that year.

A significant turnaround is apparent in 2021, where both net income and NOPAT transition to positive figures. Net income improves markedly from a loss of 5,543 million US dollars in 2020 to a gain of 15,625 million US dollars in 2021. Similarly, NOPAT moves from a negative 10,295 million US dollars to a positive 19,443 million US dollars. This change suggests improved operational performance and profitability.

The positive trend continues into 2022, with net income reaching its highest point at 35,465 million US dollars and NOPAT following suit with 41,794 million US dollars. This peak indicates a period of especially strong financial results, likely driven by favorable market conditions or operational efficiencies.

Subsequently, both metrics decrease in 2023 but remain positive, with net income declining to 21,369 million US dollars and NOPAT dropping to 19,473 million US dollars. Although reduced from the previous year, these levels still reflect solid profitability.

In 2024, the trend stabilizes with a slight decrease in net income to 17,661 million US dollars, while NOPAT marginally rises to 20,090 million US dollars. The relatively stable results in the final year suggest an adjustment phase or normalization after the previous years' volatility.

Overall Trend

Initially negative performance in 2020, followed by a significant recovery and peak in 2022, then a moderated but stable profitability in subsequent years.

Net Income

Shifted from a substantial loss in 2020 to a peak in 2022, followed by a decline though maintaining positive levels through 2024.

Net Operating Profit After Taxes (NOPAT)

Mirrored the net income pattern with negative values in 2020, peaking in 2022, and settling at stable positive levels thereafter.

Financial Implications

The significant improvements from 2020 to 2022 imply successful management initiatives or external factors favoring profitability, while the subsequent moderate decrease points to normalization or increased market pressures.

The financial data reveals a significant fluctuation in the income tax expense (benefit) over the five-year period ending December 31, 2024. In 2020, a negative income tax expense value indicates a tax benefit, contrasting sharply with subsequent years where the figures show a tax expense. The income tax expense rose markedly from 5,950 million USD in 2021 to a peak of 14,066 million USD in 2022. This was followed by a decline to 8,173 million USD in 2023, and then a slight increase to 9,757 million USD in 2024.

Cash operating taxes exhibit a broadly similar trend to income tax expense, with amounts generally increasing over the period. Starting from 1,885 million USD in 2020, cash operating taxes rose substantially to 5,416 million USD in 2021, nearly doubling to 12,067 million USD in 2022. Thereafter, cash operating taxes decreased to 7,986 million USD in 2023, before modestly rising again to 8,681 million USD in 2024.

Income Tax Expense (Benefit)

Displayed volatility between 2020 and 2024, with a reversal from a tax benefit in 2020 to substantial tax expenses in following years. This indicates varied taxable income or changes in tax-related factors.

Cash Operating Taxes

Demonstrated a consistent upward trajectory from 2020 to 2022, peaking in 2022, followed by a notable decline in 2023 and a partial rebound in 2024, reflecting fluctuations in operational taxable activities or possibly changes in tax rates or policy implementations.

General Observation

The parallel movement of income tax expense and cash operating taxes suggests alignment between accounting reported tax obligations and actual cash tax payments. Both measures peaked in 2022, indicating possibly the highest taxable earnings or less favorable tax conditions during that year, before adjusting downward in 2023 and slightly increasing thereafter.

The data reveals several noteworthy trends across the financial metrics over the five-year period ending December 31, 2024.

Total reported debt & leases

There was a significant reduction in total reported debt and leases from 48,221 million US dollars in 2020 to 27,370 million in 2022. This downward trend continued in 2023 reaching 26,070 million, but there was a slight increase to 29,611 million in 2024. Overall, the company appears to have actively managed its debt, substantially lowering its obligations in the earlier years before a moderate rise in the final year.

Total Chevron Corporation stockholders’ equity

Stockholders' equity showed a consistent upward trajectory from 131,688 million US dollars in 2020 to a peak of 160,957 million in 2023. However, in 2024, equity decreased slightly to 152,318 million. This pattern suggests a generally healthy growth in equity, reflecting retained earnings or increases in capital, with a minor decline in the most recent year which could warrant further examination.

Invested capital

Invested capital experienced fluctuations during the period studied. It started at 197,314 million US dollars in 2020, saw a marginal decline to 193,606 million in 2021, followed by an increase to 212,342 million in 2022. The figure remained virtually unchanged in 2023 at 212,337 million, before slightly decreasing to 208,395 million in 2024. This indicates an overall stable level of capital investment, with periods of both expansion and modest contraction.

In summary, while debt levels decreased significantly in the initial years, there was a rebound in the latest year. Shareholders’ equity grew steadily until a slight pullback in the last year. Invested capital remained relatively stable with minor variations. These trends imply active financial management focusing on reducing leverage and maintaining shareholder value, with some adjustments apparent in the most recent period.

Economic Profit

The economic profit experienced significant fluctuations over the five-year period. It started with a substantial negative value of -36,366 million USD in 2020, indicating considerable economic losses. In 2021, the losses decreased substantially to -8,464 million USD, showing improvement. By 2022, the economic profit turned positive to 9,869 million USD, reflecting a period of economic gain. However, the following years saw a reversal, with economic profit turning negative again to -12,413 million USD in 2023 and slightly improving but remaining negative at -10,830 million USD in 2024.

Invested Capital

The invested capital showed a relatively stable trend with a slight increase and subsequent modest decrease. It was 197,314 million USD in 2020, then slightly declined to 193,606 million USD in 2021. In 2022, invested capital increased noticeably to 212,342 million USD and remained practically unchanged in 2023 at 212,337 million USD. By 2024, there was a minor reduction to 208,395 million USD.

Economic Spread Ratio

The economic spread ratio, which indicates the difference between return on invested capital and cost of capital, followed a pattern similar to economic profit. It was significantly negative at -18.43% in 2020, improved substantially to -4.37% in 2021, and turned positive at 4.65% in 2022. This positive performance was followed by a decline back to negative values of -5.85% in 2023 and a slight improvement to -5.20% in 2024. The fluctuation reflects volatility in the company's ability to generate returns above its cost of capital during the timeframe.

Sales and Operating Revenues

There is a notable increase in sales and other operating revenues from 2020 to 2022, rising significantly from approximately US$94.5 billion in 2020 to US$235.7 billion in 2022. However, this upward trend does not continue into 2023 and 2024; instead, revenues decrease to about US$196.9 billion in 2023 and slightly further to approximately US$193.4 billion in 2024. This pattern indicates a peak in revenue in 2022 followed by a decline in the subsequent two years.

Economic Profit

The economic profit shows considerable volatility across the period. Initially, it is substantially negative in 2020 at around -US$36.4 billion but improves markedly in 2021 to approximately -US$8.5 billion. In 2022, economic profit turns positive, reaching about US$9.9 billion, which reflects a significant performance improvement. However, this positive trend reverses in 2023 and 2024, with negative economic profits of approximately -US$12.4 billion and -US$10.8 billion, respectively. This suggests challenges in maintaining profitability beyond 2022 despite strong revenues that year.

Economic Profit Margin

The economic profit margin aligns with the economic profit trend, starting from a negative margin of about -38.5% in 2020, dramatically improving to nearly -5.4% in 2021, and turning positive at 4.2% in 2022. Following this, the margin declines again in 2023 and 2024 to -6.3% and -5.6%, respectively. This pattern indicates a period of enhanced economic efficiency and profitability peaking in 2022, followed by reduced effectiveness or increased costs leading to negative margins despite relatively high revenues.

Overall Interpretation

The company experienced a recovery in economic profit and margin in 2022, coinciding with peak revenue, signifying a potentially strong operational year. Nonetheless, the reversal to negative economic profit and margin in the subsequent years despite still relatively high revenues suggests issues such as rising costs, decreasing margins, or other value-eroding factors. The data points to instability in economic profitability with an inability to sustain gains beyond 2022, highlighting the need for strategic review to address profitability challenges.