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 – 7.32% × 30,349 = 3,882
The financial performance over the five-year period is characterized by a consistent ability to generate positive economic profit, although the absolute values exhibit significant volatility. While the company successfully creates value exceeding its cost of capital in every year analyzed, the trend is marked by fluctuations in operating profitability and a gradual expansion of the invested capital base.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrates a non-linear trend, peaking at US$ 6,983 million in 2023 before experiencing a sharp decline to US$ 5,464 million in 2024. A partial recovery is observed in 2025, with profit rising to US$ 6,105 million. This volatility suggests fluctuations in operational efficiency or external market pressures affecting the operating results during this period.
- Cost of Capital and Invested Capital
- The cost of capital remains remarkably stable, fluctuating within a narrow range between 7.20% and 7.36%. In contrast, invested capital shows a general upward trajectory after an initial decrease in 2022. The capital base grew from US$ 26,603 million in 2022 to a period high of US$ 30,349 million by December 31, 2025, indicating an increase in the total assets employed to generate returns.
- Economic Profit Performance
- Economic profit correlates closely with NOPAT movements, reaching a maximum of US$ 4,997 million in 2023 and a minimum of US$ 3,390 million in 2024. Although economic profit recovered to US$ 3,882 million in 2025, it remains below the levels observed in 2021 and 2023. This suggests that the increase in invested capital has not yet translated into a proportional increase in economic value creation, resulting in a lower overall economic profit relative to the period's peak.
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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$30,349 million in 2025. The increasing trend in debt appears to be the primary driver of this overall increase in invested capital in the later years, offsetting the earlier decline and the relatively flat equity position.
The interplay between debt and equity significantly shapes the invested capital base. The increasing debt levels, coupled with the initial decrease and subsequent stabilization of equity, suggest a changing capital structure. Further investigation into the reasons behind these trends would be beneficial for a comprehensive understanding of the company’s financial position.
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Cost of Capital
Lockheed Martin Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 143,227) | 143,227) | ÷ | 166,298) | = | 0.86 | 0.86 | × | 7.90% | = | 6.80% | ||
| Outstanding debt3 | 22,000) | 22,000) | ÷ | 166,298) | = | 0.13 | 0.13 | × | 4.82% × (1 – 21.00%) | = | 0.50% | ||
| Operating lease liability4 | 1,071) | 1,071) | ÷ | 166,298) | = | 0.01 | 0.01 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 166,298) | 1.00 | 7.32% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 7.90% | = | 6.59% | ||
| 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 | 7.20% | ||||||||||
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 | × | 7.90% | = | 6.66% | ||
| 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 | 7.24% | ||||||||||
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 | × | 7.90% | = | 6.89% | ||
| 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 | 7.36% | ||||||||||
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 | × | 7.90% | = | 6.81% | ||
| 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 | 7.28% | ||||||||||
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 | 3,882) | 3,390) | 4,997) | 3,788) | 4,357) | |
| Invested capital2 | 30,349) | 28,784) | 27,427) | 26,603) | 28,620) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 12.79% | 11.78% | 18.22% | 14.24% | 15.22% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -5.82% | -35.12% | -15.06% | -20.44% | -19.05% | |
| Caterpillar Inc. | -6.93% | -2.36% | -2.42% | -6.34% | -5.74% | |
| Eaton Corp. plc | -5.09% | -6.26% | -7.84% | -9.74% | -9.35% | |
| GE Aerospace | 3.24% | -0.64% | 1.18% | -13.77% | -18.68% | |
| Honeywell International Inc. | -4.94% | -3.97% | -2.12% | -3.10% | -2.01% | |
| RTX Corp. | -0.82% | -2.94% | -4.69% | -4.74% | -4.20% | |
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 × 3,882 ÷ 30,349 = 12.79%
4 Click competitor name to see calculations.
The financial performance from 2021 through 2025 is characterized by volatility in economic profit and a steady expansion of the invested capital base after 2022. While the company consistently generated positive economic profit, the efficiency of capital utilization fluctuated, reaching a peak in 2023 before experiencing a notable decline and a subsequent partial recovery.
- Economic Profit Trends
- Economic profit exhibited significant variance over the period. A decline was noted from US$ 4,357 million in 2021 to US$ 3,788 million in 2022, followed by a substantial increase to a five-year peak of US$ 4,997 million in 2023. This growth was reversed in 2024, where profit fell to its lowest point of US$ 3,390 million, before rebounding to US$ 3,882 million by the end of 2025.
- Invested Capital Dynamics
- The invested capital base showed a general upward trajectory following a contraction in 2022. After decreasing from US$ 28,620 million in 2021 to US$ 26,603 million in 2022, the capital base grew consistently for three consecutive years, reaching US$ 30,349 million by December 31, 2025. This suggests a sustained increase in the company's resource deployment.
- Economic Spread Ratio Analysis
- The economic spread ratio, reflecting the value created per unit of capital, mirrored the movements of economic profit. The ratio declined slightly from 15.22% in 2021 to 14.24% in 2022, then surged to 18.22% in 2023, indicating maximum capital efficiency. A sharp contraction occurred in 2024, with the ratio dropping to 11.78%, the lowest in the analyzed period. A moderate recovery to 12.79% was observed in 2025.
The divergence between the growing invested capital and the fluctuating economic profit contributed to the compression of the economic spread ratio in the latter part of the period. The significant drop in 2024 indicates a period where the return on invested capital fell closest to the cost of capital, although the 2025 figures suggest a return to an improving trend in value creation.
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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 | 3,882) | 3,390) | 4,997) | 3,788) | 4,357) | |
| Sales | 75,048) | 71,043) | 67,571) | 65,984) | 67,044) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 5.17% | 4.77% | 7.40% | 5.74% | 6.50% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -3.49% | -26.54% | -8.69% | -15.61% | -15.13% | |
| Caterpillar Inc. | -7.00% | -2.21% | -2.10% | -6.14% | -6.62% | |
| Eaton Corp. plc | -6.40% | -8.04% | -10.62% | -14.45% | -14.04% | |
| GE Aerospace | 2.96% | -0.69% | 0.92% | -12.48% | -18.85% | |
| Honeywell International Inc. | -8.03% | -6.23% | -2.80% | -4.09% | -2.80% | |
| RTX Corp. | -1.01% | -3.92% | -7.38% | -7.77% | -7.30% | |
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 × 3,882 ÷ 75,048 = 5.17%
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a divergence between revenue growth and the generation of economic value. While top-line sales exhibited a general upward trajectory, particularly in the latter two years, the economic profit margin remained volatile, failing to maintain a consistent growth pattern.
- Sales Performance
- Revenue grew from 67,044 million USD in 2021 to 75,048 million USD by 2025. Despite a marginal contraction in 2022, sales experienced sustained growth starting in 2023, with the most significant increases occurring in 2024 and 2025.
- Economic Profit Trends
- Economic profit displayed significant instability, failing to track the steady rise in sales. After a decline in 2022, the figure peaked at 4,997 million USD in 2023. This was followed by a sharp contraction to 3,390 million USD in 2024, the lowest point in the observed period, before a partial recovery to 3,882 million USD in 2025.
- Economic Profit Margin Analysis
- The economic profit margin experienced notable fluctuations, peaking at 7.40% in 2023. A significant decline occurred in 2024, where the margin dropped to 4.77% despite the company achieving higher sales volumes. This indicates a reduction in value creation efficiency relative to the capital employed and revenue generated. By 2025, the margin showed a slight upward correction to 5.17%, although it remained below the 2021 and 2023 levels.
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