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.
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Lockheed Martin Corp. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Lockheed Martin Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The analysis of economic profit reveals a consistent ability to generate value above the cost of capital, although the magnitude of this value creation has experienced significant volatility between 2021 and 2025. The company maintains a positive economic profit throughout the period, indicating that operational returns exceed the required return on invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibits a fluctuating trend, peaking in 2023 at 6,983 million US$ before dropping to a period low of 5,464 million US$ in 2024. A recovery is observed in 2025, with figures rising to 6,105 million US$. This volatility serves as the primary driver for the changes observed in the overall economic profit.
- Cost of Capital and Invested Capital
- The cost of capital remained remarkably stable, oscillating within a narrow range between 7.14% and 7.29%. In contrast, invested capital showed a general upward trajectory after an initial decline in 2022. Capital investment grew from 26,603 million US$ in 2022 to 30,349 million US$ by 2025, representing a steady increase in the resource base required to generate operating profits.
- Economic Profit Performance
- Economic profit mirrored the movements of NOPAT, reaching a maximum of 5,016 million US$ in 2023. The most significant contraction occurred in 2024, where economic profit fell to 3,409 million US$. This decline was the result of a simultaneous decrease in NOPAT and an increase in invested capital, which raised the total capital charge. By 2025, economic profit improved to 3,903 million US$, though it remained below 2021 and 2023 levels despite the recovery in operating profit, due to the higher volume of invested capital.
The data suggests that while the company is successful in creating economic value, the efficiency of that value creation is sensitive to operational profit swings. The stability of the cost of capital indicates that the fluctuations in economic profit are attributable to internal operational performance and capital allocation decisions rather than external shifts in the weighted average cost of capital.
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
= × =
4 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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$641 million, indicating a return to growth after the 2024 dip.
The fluctuations in NOPAT warrant further investigation to determine the underlying drivers. Factors such as changes in revenue, operating expenses, and tax rates could contribute to these observed patterns. The increasing difference between NOPAT and net earnings in the later years also suggests a need to analyze non-operating items impacting net income.
Cash Operating Taxes
Lockheed Martin Corp., cash operating taxes calculation
US$ 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$939 million. This suggests a potential shift in the timing of tax payments relative to reported income, or a change in underlying tax liabilities.
- Relationship between Tax Expense and Cash Taxes
- A consistent difference exists between federal and foreign income tax expense and cash operating taxes. Cash operating taxes were consistently higher than the reported tax expense from 2021 through 2024. However, in 2025, cash operating taxes fell below the reported tax expense. This divergence could be attributable to factors such as deferred tax assets, tax credits, or differences in accounting versus cash-based tax calculations.
- Potential Implications
- The substantial decrease in cash operating taxes in 2025 warrants further investigation. It could indicate improved tax efficiency, changes in tax legislation, or a temporary reduction in taxable income. The difference between reported tax expense and cash taxes should be examined to understand the underlying drivers and potential impact on future cash flows.
The fluctuations in both reported tax expense and cash operating taxes suggest a dynamic tax environment. Continued monitoring of these figures is recommended to assess the sustainability of observed trends and their impact on overall financial performance.
Invested Capital
Lockheed Martin Corp., invested capital calculation (financing approach)
US$ 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$30,349 million in 2025. The increasing trend in debt appears to be the primary driver of this overall increase in invested capital in the later years, offsetting the earlier decline and the relatively flat equity position.
The interplay between debt and equity significantly shapes the invested capital base. The increasing debt levels, coupled with the initial decrease and subsequent stabilization of equity, suggest a changing capital structure. Further investigation into the reasons behind these trends would be beneficial for a comprehensive understanding of the company’s financial position.
Cost of Capital
Lockheed Martin Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| RTX Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The financial performance between 2021 and 2025 is characterized by significant volatility in value creation, as evidenced by the fluctuations in economic profit and the economic spread ratio. While the capital base showed a general expansion after 2022, the efficiency with which this capital generated value above the required return varied considerably over the five-year period.
- Economic Spread Ratio Analysis
- The economic spread ratio experienced a peak of 18.29% in 2023, marking the period of highest relative value creation. This was followed by a sharp contraction to 11.84% in 2024, the lowest point in the sequence. Although a modest recovery to 12.86% is observed in 2025, the ratio remains lower than the 15.29% recorded in 2021, suggesting a general decline in the spread over the long term.
- Invested Capital Trends
- Invested capital initially decreased from US$ 28,620 million in 2021 to US$ 26,603 million in 2022. Following this dip, a consistent upward trend is observed, with capital increasing annually to reach US$ 30,349 million by December 31, 2025. This indicates a steady growth in the company's total invested resource base over the final three years of the period.
- Economic Profit Patterns
- Economic profit demonstrated instability, starting at US$ 4,377 million in 2021 and reaching a maximum of US$ 5,016 million in 2023. A significant decline occurred in 2024, with profit falling to US$ 3,409 million. A partial recovery to US$ 3,903 million is noted in 2025, though the profit levels remain below the benchmarks set in 2021 and 2023.
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 | ||||||
| Sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| RTX Corp. | ||||||
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 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a divergence between revenue growth and economic value creation. While sales exhibited a general upward trajectory, particularly in the latter years, economic profit and the corresponding profit margin demonstrated significant volatility.
- Sales Performance
- Revenue experienced a slight contraction in 2022 before entering a period of sustained expansion. Sales grew from 67,044 million USD in 2021 to 75,048 million USD by 2025, indicating a consistent increase in market activity and top-line growth over the observed period.
- Economic Profit Volatility
- Economic profit did not follow the linear growth of sales, exhibiting instead a fluctuating pattern. A peak of 5,016 million USD was reached in 2023, followed by a sharp decline to a five-year low of 3,409 million USD in 2024. A moderate recovery occurred in 2025, with economic profit rising to 3,903 million USD.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the instability of the absolute economic profit figures. The margin peaked at 7.42% in 2023 but contracted significantly to 4.80% in 2024. This decline is particularly notable as it occurred during a period of increasing sales, suggesting that the cost of capital or operational expenses increased at a rate that offset revenue gains. Although the margin improved to 5.20% in 2025, it remained below the levels established in 2021 and 2023.