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
Lockheed Martin Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 6,105 – 7.55% × 30,349 = 3,812
The analysis of economic profit from 2021 to 2025 indicates a consistent ability to generate value above the cost of capital, although the magnitude of this value creation has experienced significant volatility. While economic profit remained positive throughout the period, the fluctuations are primarily driven by variations in net operating profit after taxes (NOPAT) rather than shifts in the cost of capital.
- Net Operating Profit After Taxes (NOPAT) Trends
- Operating profitability exhibited a non-linear trajectory, characterized by a decline in 2022, a peak in 2023 at 6,983 million US$, and a subsequent sharp contraction in 2024 to 5,464 million US$. A recovery is observed in 2025, with NOPAT rising to 6,105 million US$. This volatility suggests periodic fluctuations in operating efficiency or revenue streams.
- Invested Capital and Cost of Capital Stability
- The cost of capital remained remarkably stable over the five-year horizon, fluctuating within a narrow range between 7.43% and 7.59%. In contrast, invested capital showed a general upward trend following a dip in 2022. After reaching a low of 26,603 million US$ in 2022, invested capital increased steadily each year, reaching 30,349 million US$ by 2025, indicating a sustained increase in the company's asset base or capital investments.
- Economic Profit Performance
- Economic profit mirrored the volatility of NOPAT, peaking in 2023 at 4,935 million US$ and reaching its lowest point in 2024 at 3,326 million US$. Despite these swings, the company maintained a positive economic profit in every year analyzed, confirming that the return on invested capital consistently exceeded the weighted average cost of capital. The recovery in 2025 to 3,812 million US$ suggests a stabilization of value creation efforts.
Overall, the correlation between NOPAT and economic profit is strong, while the stability of the cost of capital suggests that the primary driver of economic value variance is operational performance rather than changes in the financing environment or risk profile.
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Net Operating Profit after Taxes (NOPAT)
Lockheed Martin Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net earnings.
3 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,071 × 3.80% = 41
4 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,159 × 21.00% = 243
5 Addition of after taxes interest expense to net earnings.
6 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 253 × 21.00% = 53
7 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited fluctuations over the five-year period. While generally tracking closely with net earnings, NOPAT demonstrated a slightly different trajectory, particularly in the earlier years. An initial observation reveals a period of growth followed by contraction and subsequent recovery.
- Overall Trend
- NOPAT began at US$6,442 million in 2021, experienced a slight decrease to US$5,745 million in 2022, then increased substantially to US$6,983 million in 2023. A subsequent decline to US$5,464 million occurred in 2024, followed by a recovery to US$6,105 million in 2025. This pattern suggests sensitivity to underlying operational factors and potentially external economic conditions.
- Comparison to Net Earnings
- In 2021 and 2022, NOPAT was marginally higher than net earnings. This difference narrowed in 2023, with NOPAT exceeding net earnings by US$63 million. In 2024, the difference widened again, with net earnings falling more significantly than NOPAT. By 2025, NOPAT surpassed net earnings by US$1,088 million, indicating a divergence in the factors impacting reported net income versus core operational profitability.
- Year-over-Year Changes
- The largest year-over-year increase in NOPAT occurred between 2022 and 2023, with a growth of US$1,238 million. The most substantial decrease was observed between 2023 and 2024, representing a decline of US$1,519 million. The final period, from 2024 to 2025, showed a positive change of US$641 million, indicating a return to growth after the 2024 dip.
The fluctuations in NOPAT warrant further investigation to determine the underlying drivers. Factors such as changes in revenue, operating expenses, and tax rates could contribute to these observed patterns. The increasing difference between NOPAT and net earnings in the later years also suggests a need to analyze non-operating items impacting net income.
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Cash Operating Taxes
Lockheed Martin Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The reported federal and foreign income tax expense exhibited volatility over the five-year period. It decreased from US$1,235 million in 2021 to US$948 million in 2022, before increasing to US$1,178 million in 2023. A subsequent decline to US$884 million was noted in 2024, followed by a modest increase to US$905 million in 2025.
Cash operating taxes demonstrated a different pattern. An initial increase from US$1,500 million in 2021 to US$1,910 million in 2022 was observed. This was followed by a decrease to US$1,825 million in 2023 and a further reduction to US$1,662 million in 2024. A significant decrease occurred in 2025, with cash operating taxes falling to US$723 million.
- Trend Analysis - Cash Operating Taxes
- Cash operating taxes generally decreased over the period from 2022 to 2025. The most substantial decline occurred between 2024 and 2025, representing a reduction of approximately US$939 million. This suggests a potential shift in the timing of tax payments relative to reported income, or a change in underlying tax liabilities.
- Relationship between Tax Expense and Cash Taxes
- A consistent difference exists between federal and foreign income tax expense and cash operating taxes. Cash operating taxes were consistently higher than the reported tax expense from 2021 through 2024. However, in 2025, cash operating taxes fell below the reported tax expense. This divergence could be attributable to factors such as deferred tax assets, tax credits, or differences in accounting versus cash-based tax calculations.
- Potential Implications
- The substantial decrease in cash operating taxes in 2025 warrants further investigation. It could indicate improved tax efficiency, changes in tax legislation, or a temporary reduction in taxable income. The difference between reported tax expense and cash taxes should be examined to understand the underlying drivers and potential impact on future cash flows.
The fluctuations in both reported tax expense and cash operating taxes suggest a dynamic tax environment. Continued monitoring of these figures is recommended to assess the sustainability of observed trends and their impact on overall financial performance.
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Invested Capital
Lockheed Martin Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to stockholders’ equity.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
6 Subtraction of marketable securities.
The composition of invested capital exhibits notable shifts over the five-year period. Total reported debt & leases consistently increased, while stockholders’ equity experienced a decline before stabilizing. These movements significantly influence the overall invested capital figure.
- Total Reported Debt & Leases
- A clear upward trend is observed in total reported debt & leases, increasing from US$13,076 million in 2021 to US$22,771 million in 2025. The rate of increase accelerated between 2021 and 2023, then moderated slightly in the subsequent two years. This suggests a growing reliance on debt financing.
- Stockholders’ Equity
- Stockholders’ equity demonstrated a substantial decrease from US$10,959 million in 2021 to US$6,333 million in 2023. A modest recovery is then seen, with equity reaching US$6,721 million in 2025. This decline and subsequent stabilization may be attributable to factors such as share repurchases, dividend payments, or retained earnings performance.
- Invested Capital
- Invested capital initially decreased from US$28,620 million in 2021 to US$26,603 million in 2022, coinciding with the decline in stockholders’ equity. It then experienced a gradual increase, reaching US$30,349 million in 2025. The increasing trend in debt appears to be the primary driver of this overall increase in invested capital in the later years, offsetting the earlier decline and the relatively flat equity position.
The interplay between debt and equity significantly shapes the invested capital base. The increasing debt levels, coupled with the initial decrease and subsequent stabilization of equity, suggest a changing capital structure. Further investigation into the reasons behind these trends would be beneficial for a comprehensive understanding of the company’s financial position.
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Cost of Capital
Lockheed Martin Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 143,227) | 143,227) | ÷ | 166,298) | = | 0.86 | 0.86 | × | 8.16% | = | 7.03% | ||
| Outstanding debt3 | 22,000) | 22,000) | ÷ | 166,298) | = | 0.13 | 0.13 | × | 4.82% × (1 – 21.00%) | = | 0.50% | ||
| Operating lease liability4 | 1,071) | 1,071) | ÷ | 166,298) | = | 0.01 | 0.01 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 166,298) | 1.00 | 7.55% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 107,677) | 107,677) | ÷ | 129,025) | = | 0.83 | 0.83 | × | 8.16% | = | 6.81% | ||
| Outstanding debt3 | 20,200) | 20,200) | ÷ | 129,025) | = | 0.16 | 0.16 | × | 4.78% × (1 – 21.00%) | = | 0.59% | ||
| Operating lease liability4 | 1,148) | 1,148) | ÷ | 129,025) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 129,025) | 1.00 | 7.43% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 106,243) | 106,243) | ÷ | 125,920) | = | 0.84 | 0.84 | × | 8.16% | = | 6.89% | ||
| Outstanding debt3 | 18,500) | 18,500) | ÷ | 125,920) | = | 0.15 | 0.15 | × | 4.80% × (1 – 21.00%) | = | 0.56% | ||
| Operating lease liability4 | 1,177) | 1,177) | ÷ | 125,920) | = | 0.01 | 0.01 | × | 2.90% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 125,920) | 1.00 | 7.47% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 117,388) | 117,388) | ÷ | 134,605) | = | 0.87 | 0.87 | × | 8.16% | = | 7.12% | ||
| Outstanding debt3 | 16,000) | 16,000) | ÷ | 134,605) | = | 0.12 | 0.12 | × | 4.83% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 1,217) | 1,217) | ÷ | 134,605) | = | 0.01 | 0.01 | × | 2.40% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 134,605) | 1.00 | 7.59% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 105,437) | 105,437) | ÷ | 122,237) | = | 0.86 | 0.86 | × | 8.16% | = | 7.04% | ||
| Outstanding debt3 | 15,400) | 15,400) | ÷ | 122,237) | = | 0.13 | 0.13 | × | 4.57% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 1,400) | 1,400) | ÷ | 122,237) | = | 0.01 | 0.01 | × | 2.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 122,237) | 1.00 | 7.51% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Lockheed Martin Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 3,812) | 3,326) | 4,935) | 3,726) | 4,291) | |
| Invested capital2 | 30,349) | 28,784) | 27,427) | 26,603) | 28,620) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 12.56% | 11.55% | 17.99% | 14.01% | 14.99% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -5.78% | -35.08% | -15.01% | -20.40% | -19.01% | |
| Caterpillar Inc. | -6.76% | -2.20% | -2.26% | -6.19% | -5.60% | |
| Eaton Corp. plc | -5.03% | -6.21% | -7.78% | -9.69% | -9.30% | |
| GE Aerospace | 3.37% | -0.52% | 1.30% | -13.67% | -18.58% | |
| Honeywell International Inc. | -4.97% | -4.00% | -2.14% | -3.12% | -2.03% | |
| RTX Corp. | -1.00% | -3.11% | -4.84% | -4.90% | -4.36% | |
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,812 ÷ 30,349 = 12.56%
4 Click competitor name to see calculations.
The financial performance over the five-year period from 2021 to 2025 exhibits a non-linear trend in value creation, characterized by a significant peak in 2023 followed by a contraction in 2024 and a partial recovery in 2025.
- Economic Profit
- Economic profit experienced volatility throughout the period. After an initial decline from 4,291 million USD in 2021 to 3,726 million USD in 2022, a sharp increase occurred in 2023, reaching a period high of 4,935 million USD. This was followed by a substantial reduction to 3,326 million USD in 2024, the lowest value in the dataset, before rising again to 3,812 million USD by the end of 2025.
- Invested Capital
- The capital base showed a general upward trajectory following a dip in 2022. Invested capital decreased from 28,620 million USD in 2021 to 26,603 million USD in 2022, but subsequently grew steadily each year, ending the period at 30,349 million USD in 2025. This indicates a sustained increase in the resources deployed to generate economic value.
- Economic Spread Ratio
- The economic spread ratio mirrors the fluctuations seen in economic profit, reflecting the efficiency of capital utilization. The ratio declined slightly in 2022 to 14.01% before peaking at 17.99% in 2023. A significant contraction occurred in 2024, where the ratio fell to 11.55%, coinciding with the simultaneous increase in invested capital and decrease in economic profit. A modest improvement to 12.56% was recorded in 2025.
The correlation between the economic spread ratio and economic profit suggests that the 2023 peak was driven by high operational efficiency relative to the capital employed. Conversely, the 2024 decline highlights a period where the growth in invested capital did not translate into proportional economic gains, resulting in a compression of the spread.
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Economic Profit Margin
Lockheed Martin Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 3,812) | 3,326) | 4,935) | 3,726) | 4,291) | |
| Sales | 75,048) | 71,043) | 67,571) | 65,984) | 67,044) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 5.08% | 4.68% | 7.30% | 5.65% | 6.40% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -3.46% | -26.51% | -8.67% | -15.58% | -15.10% | |
| Caterpillar Inc. | -6.83% | -2.06% | -1.97% | -5.99% | -6.46% | |
| Eaton Corp. plc | -6.33% | -7.97% | -10.54% | -14.37% | -13.96% | |
| GE Aerospace | 3.07% | -0.56% | 1.01% | -12.40% | -18.76% | |
| Honeywell International Inc. | -8.06% | -6.26% | -2.83% | -4.12% | -2.84% | |
| RTX Corp. | -1.23% | -4.14% | -7.61% | -8.04% | -7.58% | |
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales
= 100 × 3,812 ÷ 75,048 = 5.08%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2021 to 2025 reveals a divergence between revenue growth and the generation of economic value. While sales demonstrated a consistent upward trajectory in the latter half of the period, economic profit exhibited significant volatility, indicating that top-line expansion did not proportionally translate into increased economic value.
- Sales Growth Trends
- Revenue experienced a general increase, rising from 67,044 million US dollars in 2021 to 75,048 million US dollars by 2025. Following a slight contraction in 2022, sales grew steadily, with the most pronounced acceleration occurring between 2023 and 2025.
- Economic Profit Volatility
- Economic profit did not follow the linear growth of sales. The metric peaked in 2023 at 4,935 million US dollars before experiencing a sharp decline to 3,326 million US dollars in 2024. A partial recovery was noted in 2025, with economic profit rising to 3,812 million US dollars, although this remained below the 2021 and 2023 levels.
- Economic Profit Margin Analysis
- The economic profit margin reflected these fluctuations, reaching a maximum of 7.30% in 2023. A significant contraction occurred in 2024, where the margin fell to a period low of 4.68%, suggesting a decrease in capital efficiency or an increase in the cost of capital relative to operating returns. By 2025, the margin improved slightly to 5.08%, though it failed to return to the baseline of 6.40% observed in 2021.
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