Stock Analysis on Net

Eaton Corp. plc (NYSE:ETN)

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.


Economic Profit

Eaton Corp. plc, 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 3,854 3,310 2,473 2,328 1,541
Cost of capital2 14.38% 14.36% 13.93% 13.50% 13.37%
Invested capital3 31,924 31,576 30,906 29,709 27,450
 
Economic profit4 (736) (1,225) (1,831) (1,682) (2,128)

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
= 3,85414.38% × 31,924 = -736

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Eaton Corp. plc economic profit increased from 2022 to 2023 and from 2023 to 2024.

Net Operating Profit after Taxes (NOPAT)

Eaton Corp. plc, 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 attributable to Eaton ordinary shareholders 3,794 3,218 2,462 2,144 1,410
Deferred income tax expense (benefit)1 (154) (182) (128) (30) (125)
Increase (decrease) in allowance for credit losses2 17 7 (11) (6) (1)
Increase (decrease) in deferred revenue liabilities3 (8) 118 86 165 23
Increase (decrease) in product warranty accruals4 14 11 (26) (36)
Increase (decrease) in liabilities related to workforce reductions, plant closing and other associated costs5 62 (63) (38) 142
Increase (decrease) in equity equivalents6 (69) (46) (116) 65 3
Interest expense, net 130 151 144 144 149
Interest expense, operating lease liability7 37 27 19 12 15
Adjusted interest expense, net 167 178 163 156 164
Tax benefit of interest expense, net8 (42) (44) (41) (39) (41)
Adjusted interest expense, net, after taxes9 125 133 123 117 123
Net income (loss) attributable to noncontrolling interest 4 5 4 2 5
Net operating profit after taxes (NOPAT) 3,854 3,310 2,473 2,328 1,541

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 deferred revenue liabilities.

4 Addition of increase (decrease) in product warranty accruals.

5 Addition of increase (decrease) in liabilities related to workforce reductions, plant closing and other associated costs.

6 Addition of increase (decrease) in equity equivalents to net income attributable to Eaton ordinary shareholders.

7 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 832 × 4.40% = 37

8 2024 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 167 × 25.00% = 42

9 Addition of after taxes interest expense to net income attributable to Eaton ordinary shareholders.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Eaton Corp. plc NOPAT increased from 2022 to 2023 and from 2023 to 2024.

Cash Operating Taxes

Eaton Corp. plc, 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 768 604 445 750 331
Less: Deferred income tax expense (benefit) (154) (182) (128) (30) (125)
Add: Tax savings from interest expense, net 42 44 41 39 41
Cash operating taxes 964 830 614 819 497

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).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Eaton Corp. plc cash operating taxes increased from 2022 to 2023 and from 2023 to 2024.

Invested Capital

Eaton Corp. plc, 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
Short-term debt 8 324 13 1
Current portion of long-term debt 674 1,017 10 1,735 1,047
Long-term debt, excluding current portion 8,478 8,244 8,321 6,831 7,010
Operating lease liability1 832 668 586 457 442
Total reported debt & leases 9,984 9,937 9,241 9,036 8,500
Total Eaton shareholders’ equity 18,488 19,036 17,038 16,413 14,930
Net deferred tax (assets) liabilities2 (334) (56) 200 167 (152)
Allowance for credit losses3 55 38 31 42 48
Deferred revenue liabilities4 618 626 508 422 257
Product warranty accruals5 150 136 125 125 151
Liabilities related to workforce reductions, plant closing and other associated costs6 103 41 41 104 142
Equity equivalents7 592 785 905 860 446
Accumulated other comprehensive (income) loss, net of tax8 4,342 3,906 3,946 3,633 4,195
Noncontrolling interests 43 33 37 38 43
Adjusted total Eaton shareholders’ equity 23,465 23,760 21,926 20,944 19,614
Short-term investments9 (1,525) (2,121) (261) (271) (664)
Invested capital 31,924 31,576 30,906 29,709 27,450

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 deferred revenue liabilities.

5 Addition of product warranty accruals.

6 Addition of liabilities related to workforce reductions, plant closing and other associated costs.

7 Addition of equity equivalents to total Eaton shareholders’ equity.

8 Removal of accumulated other comprehensive income.

9 Subtraction of short-term investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Eaton Corp. plc invested capital increased from 2022 to 2023 and from 2023 to 2024.

Cost of Capital

Eaton Corp. plc, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 113,829 113,829 ÷ 123,312 = 0.92 0.92 × 15.35% = 14.17%
Debt3 8,651 8,651 ÷ 123,312 = 0.07 0.07 × 3.42% × (1 – 25.00%) = 0.18%
Operating lease liability4 832 832 ÷ 123,312 = 0.01 0.01 × 4.40% × (1 – 25.00%) = 0.02%
Total: 123,312 1.00 14.38%

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

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 115,456 115,456 ÷ 125,056 = 0.92 0.92 × 15.35% = 14.18%
Debt3 8,932 8,932 ÷ 125,056 = 0.07 0.07 × 3.19% × (1 – 25.00%) = 0.17%
Operating lease liability4 668 668 ÷ 125,056 = 0.01 0.01 × 4.00% × (1 – 25.00%) = 0.02%
Total: 125,056 1.00 14.36%

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

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 68,766 68,766 ÷ 77,301 = 0.89 0.89 × 15.35% = 13.66%
Debt3 7,949 7,949 ÷ 77,301 = 0.10 0.10 × 3.21% × (1 – 25.00%) = 0.25%
Operating lease liability4 586 586 ÷ 77,301 = 0.01 0.01 × 3.30% × (1 – 25.00%) = 0.02%
Total: 77,301 1.00 13.93%

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

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 59,545 59,545 ÷ 69,247 = 0.86 0.86 × 15.35% = 13.20%
Debt3 9,245 9,245 ÷ 69,247 = 0.13 0.13 × 2.82% × (1 – 25.00%) = 0.28%
Operating lease liability4 457 457 ÷ 69,247 = 0.01 0.01 × 2.60% × (1 – 25.00%) = 0.01%
Total: 69,247 1.00 13.50%

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

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 52,820 52,820 ÷ 62,338 = 0.85 0.85 × 15.35% = 13.01%
Debt3 9,076 9,076 ÷ 62,338 = 0.15 0.15 × 3.10% × (1 – 25.00%) = 0.34%
Operating lease liability4 442 442 ÷ 62,338 = 0.01 0.01 × 3.30% × (1 – 25.00%) = 0.02%
Total: 62,338 1.00 13.37%

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

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Eaton Corp. plc, 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 (736) (1,225) (1,831) (1,682) (2,128)
Invested capital2 31,924 31,576 30,906 29,709 27,450
Performance Ratio
Economic spread ratio3 -2.30% -3.88% -5.93% -5.66% -7.75%
Benchmarks
Economic Spread Ratio, Competitors4
Boeing Co. -35.78% -15.73% -21.11% -19.65% -31.16%
Caterpillar Inc. 4.43% 4.32% 0.15% 0.30% -6.22%
GE Aerospace 4.29% 5.85% -10.05% -15.02% -4.88%
Honeywell International Inc. -3.07% -1.16% -2.12% -1.05% -2.39%
Lockheed Martin Corp. 10.39% 16.82% 12.79% 13.79% 17.11%
RTX Corp. -1.08% -2.93% -2.76% -2.30% -7.86%

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 × -736 ÷ 31,924 = -2.30%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Eaton Corp. plc economic spread ratio improved from 2022 to 2023 and from 2023 to 2024.

Economic Profit Margin

Eaton Corp. plc, 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 (736) (1,225) (1,831) (1,682) (2,128)
 
Net sales 24,878 23,196 20,752 19,628 17,858
Add: Increase (decrease) in deferred revenue liabilities (8) 118 86 165 23
Adjusted net sales 24,870 23,314 20,838 19,793 17,881
Performance Ratio
Economic profit margin2 -2.96% -5.25% -8.79% -8.50% -11.90%
Benchmarks
Economic Profit Margin, Competitors3
Boeing Co. -27.03% -9.07% -16.11% -15.59% -25.52%
Caterpillar Inc. 4.15% 3.75% 0.15% 0.35% -8.61%
GE Aerospace 4.60% 4.55% -9.11% -15.16% -7.79%
Honeywell International Inc. -4.81% -1.53% -2.80% -1.47% -3.54%
Lockheed Martin Corp. 4.21% 6.83% 5.16% 5.89% 7.34%
RTX Corp. -1.48% -4.76% -4.66% -4.10% -16.06%

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 ÷ Adjusted net sales
= 100 × -736 ÷ 24,870 = -2.96%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Eaton Corp. plc economic profit margin improved from 2022 to 2023 and from 2023 to 2024.