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
Marathon Petroleum Corp., economic profit calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 10,783 – 15.01% × 63,897 = 1,190
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed significant volatility over the analyzed years. It started at $6,182 million in 2019, declined sharply to a negative value of -$10,978 million in 2020, which indicates a substantial loss. The figure rebounded to $6,187 million in 2021, nearly recovering to the 2019 level. In 2022, NOPAT increased considerably to $17,951 million, marking a strong recovery and growth. However, in 2023, it decreased again to $10,783 million, which, while lower than the previous year, still represents a positive result.
- Cost of Capital
- The cost of capital showed a steady increase throughout the five years, starting at 11.6% in 2019 and rising gradually to 15.01% in 2023. This upward trend suggests growing expectations of return by investors or increased risk associated with the company’s investments.
- Invested Capital
- The invested capital decreased from $82,004 million in 2019 to $63,897 million in 2023, showing a declining trend over the period. Notably, this reduction is not linear; it dropped sharply in 2020 to $70,186 million, continued to decline in 2021 to $63,579 million, then experienced a slight increase in 2022 to $69,547 million before declining again in the last reported year. This pattern indicates fluctuations in the company’s investment base, potentially influenced by operational adjustments or asset disposals.
- Economic Profit
- The economic profit figures display notable volatility, reflecting the fluctuations in both operating performance and cost of capital. In 2019, the economic profit was negative at -$3,330 million. The loss widened substantially in 2020, reaching -$19,160 million, coinciding with the sharp dip in NOPAT and higher cost of capital. In 2021, economic profit improved significantly to -$2,204 million, nearing break-even. The year 2022 marked a pivotal turning point, with economic profit becoming positive at $7,574 million, indicating value creation above the cost of capital. In 2023, economic profit decreased sharply to $1,190 million but remained positive, suggesting continued though reduced value generation.
- Summary of Trends and Insights
- The analyzed period reveals a company experiencing significant operational challenges and recovery phases. The steep decline in profitability during 2020 aligns with increased economic difficulties or industry-specific shocks. Subsequent recovery in 2021 and strong performance in 2022 reflect successful stabilization and growth strategies, although profitability decreased somewhat in 2023. Rising cost of capital throughout the period may have exerted pressure on value creation, as shown by the initially negative economic profits. The positive shift in economic profit from 2022 onward indicates a period of value creation, despite lower invested capital, suggesting improved capital efficiency. Overall, the company demonstrates resilience with positive returns in recent years amid a challenging cost of capital environment.
Net Operating Profit after Taxes (NOPAT)
Marathon Petroleum Corp., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in restructuring reserve.
5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to MPC.
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,218 × 4.10% = 50
7 2023 Calculation
Tax benefit of interest expense, net of interest capitalized = Adjusted interest expense, net of interest capitalized × Statutory income tax rate
= 1,315 × 21.00% = 276
8 Addition of after taxes interest expense to net income (loss) attributable to MPC.
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 530 × 21.00% = 111
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The analyzed financial data reveals significant fluctuations in key profitability indicators over the five-year period ending December 31, 2023.
- Net Income (Loss) Attributable to MPC
- Net income exhibited pronounced volatility. The figure fell from a positive $2,637 million in 2019 to a substantial loss of $9,826 million in 2020, indicating a severe downturn, likely driven by adverse market or operational factors during that year. Recovery occurred in 2021 with net income rising sharply to $9,738 million, surpassing the 2019 level. This upward momentum continued into 2022, reaching a peak of $14,516 million, followed by a decline in 2023 to $9,681 million. Overall, the net income reflected substantial cyclical variation, with a drastic loss followed by strong recovery and subsequent moderation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT mirrored the pattern shown by net income, experiencing a significant negative shift in 2020 where it dropped to -$10,978 million from $6,182 million in 2019. The following years saw a robust recovery with NOPAT increasing to $6,187 million in 2021, nearly returning to the 2019 level, and then peaking at $17,951 million in 2022, which notably exceeded prior peaks in both net income and NOPAT. In 2023, NOPAT decreased to $10,783 million, indicating a moderation but remaining well above pre-2020 levels.
These trends suggest that the company was affected by a significant adverse event or market condition in 2020 leading to large losses and negative operating profit. However, the subsequent two years showed a robust rebound and profitability expansion beyond pre-2020 figures, implying possible operational improvements or favorable market conditions. The slight decline in both net income and NOPAT in 2023 could indicate some normalization or emerging challenges following exceptional performance in 2022.
Cash Operating Taxes
Marathon Petroleum Corp., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
- Income Tax Provision (Benefit)
- The income tax provision experienced significant volatility over the analyzed period. It started with a positive provision of 1,074 million USD at the end of 2019, followed by a substantial tax benefit of -2,430 million USD in 2020, indicating a reversal or tax credit situation. In 2021, the provision reverted to a modest positive value of 264 million USD. A notable increase occurred in 2022, reaching 4,491 million USD, before declining to 2,817 million USD at the end of 2023. This pattern suggests considerable fluctuations in taxable income or tax planning strategies leading to large swings in tax expense provisions.
- Cash Operating Taxes
- Cash operating taxes mirrored the overall trend of the income tax provision but with more pronounced changes. The 2019 figure stood at 324 million USD, then sharply decreased to a cash inflow (negative tax payment) of -1,899 million USD in 2020, reflecting adjustments or refunds. In 2021, cash taxes surged to 705 million USD, climbed dramatically to 4,421 million USD in 2022—the peak value in the period—and subsequently dropped to 3,010 million USD in 2023. These fluctuations align with variations in operational profitability and tax settlement timings, indicating an erratic but generally increasing cash tax burden post-2020.
Invested Capital
Marathon Petroleum Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 LIFO reserve. See details »
5 Addition of restructuring reserve.
6 Addition of equity equivalents to total MPC stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of short-term investments.
The financial data reveals several key trends in the capital structure and investment base over the five-year period ending in 2023.
- Total reported debt & leases
- The total reported debt and leases experienced some fluctuations. Initially, it increased from 31,317 million USD in 2019 to a peak of 33,095 million USD in 2020. This was followed by a notable decline in 2021 to 26,904 million USD. Subsequently, a moderate rise occurred over the next two years, reaching 28,501 million USD in 2023. Overall, the debt levels show some volatility but remained below the 2019 level by the end of 2023.
- Total MPC stockholders’ equity
- Stockholders’ equity showed a declining trend over the period. Starting at 33,694 million USD in 2019, equity sharply decreased to 22,199 million USD in 2020. Although it buoyantly recovered to 26,206 million USD in 2021 and further increased to 27,715 million USD in 2022, equity declined again to 24,404 million USD in 2023. Despite recovery attempts, equity in 2023 remained significantly below the 2019 level, indicating possible challenges affecting retained earnings or other components of equity.
- Invested capital
- The invested capital consistently trended downward from 82,004 million USD in 2019 to 63,897 million USD in 2023, with intermediate fluctuations. It dropped to 70,186 million USD in 2020 and further to 63,579 million USD in 2021. A recovery occurred in 2022, reaching 69,547 million USD, followed by a decline again to 63,897 million USD in 2023. This pattern suggests variability in capital investment levels or changes in capital employed over the timeframe.
In summary, the data indicates that the company experienced a general reduction in invested capital and equity levels over the five years, paired with fluctuating debt levels that ultimately ended slightly below the initial value. The changes in equity and invested capital might reflect operational or strategic adjustments impacting the capital structure.
Cost of Capital
Marathon Petroleum Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 60,405) | 60,405) | ÷ | 87,593) | = | 0.69 | 0.69 | × | 20.16% | = | 13.91% | ||
| Debt3 | 25,970) | 25,970) | ÷ | 87,593) | = | 0.30 | 0.30 | × | 4.54% × (1 – 21.00%) | = | 1.06% | ||
| Operating lease liability4 | 1,218) | 1,218) | ÷ | 87,593) | = | 0.01 | 0.01 | × | 4.10% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 87,593) | 1.00 | 15.01% | ||||||||||
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 | 55,925) | 55,925) | ÷ | 81,664) | = | 0.68 | 0.68 | × | 20.16% | = | 13.81% | ||
| Debt3 | 24,530) | 24,530) | ÷ | 81,664) | = | 0.30 | 0.30 | × | 4.51% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,209) | 1,209) | ÷ | 81,664) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 81,664) | 1.00 | 14.92% | ||||||||||
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 | 42,086) | 42,086) | ÷ | 72,149) | = | 0.58 | 0.58 | × | 20.16% | = | 11.76% | ||
| Debt3 | 28,698) | 28,698) | ÷ | 72,149) | = | 0.40 | 0.40 | × | 4.42% × (1 – 21.00%) | = | 1.39% | ||
| Operating lease liability4 | 1,365) | 1,365) | ÷ | 72,149) | = | 0.02 | 0.02 | × | 3.11% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 72,149) | 1.00 | 13.20% | ||||||||||
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 | 35,573) | 35,573) | ÷ | 72,629) | = | 0.49 | 0.49 | × | 20.16% | = | 9.88% | ||
| Debt3 | 35,545) | 35,545) | ÷ | 72,629) | = | 0.49 | 0.49 | × | 4.45% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 1,511) | 1,511) | ÷ | 72,629) | = | 0.02 | 0.02 | × | 3.68% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 72,629) | 1.00 | 11.66% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,799) | 30,799) | ÷ | 64,076) | = | 0.48 | 0.48 | × | 20.16% | = | 9.69% | ||
| Debt3 | 30,798) | 30,798) | ÷ | 64,076) | = | 0.48 | 0.48 | × | 4.70% × (1 – 21.00%) | = | 1.78% | ||
| Operating lease liability4 | 2,479) | 2,479) | ÷ | 64,076) | = | 0.04 | 0.04 | × | 4.02% × (1 – 21.00%) | = | 0.12% | ||
| Total: | 64,076) | 1.00 | 11.60% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Marathon Petroleum Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,190) | 7,574) | (2,204) | (19,160) | (3,330) | |
| Invested capital2 | 63,897) | 69,547) | 63,579) | 70,186) | 82,004) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 1.86% | 10.89% | -3.47% | -27.30% | -4.06% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -5.85% | 4.64% | -4.38% | -18.44% | — | |
| ConocoPhillips | 0.04% | 12.64% | -1.26% | -19.80% | — | |
| Exxon Mobil Corp. | -0.46% | 8.27% | -0.13% | -23.33% | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,190 ÷ 63,897 = 1.86%
4 Click competitor name to see calculations.
- Economic Profit
- Economic profit experienced significant volatility over the period. It started with a negative value of -3,330 million USD in 2019, which deteriorated sharply to -19,160 million USD in 2020. This was followed by an improvement to -2,204 million USD in 2021, a turnaround to a positive 7,574 million USD in 2022, and a subsequent decrease to 1,190 million USD in 2023. The overall trend indicates initial substantial losses, recovery into profitability by 2022, though with a reduced economic profit in 2023 compared to the previous year.
- Invested Capital
- Invested capital showed a general declining trend throughout the period, starting from 82,004 million USD in 2019 and decreasing to 63,897 million USD in 2023. There was a notable decline from 2019 to 2021, followed by a slight recovery in 2022, and another decrease in 2023. This contraction in invested capital may reflect divestitures, asset sales, or efficiency improvements.
- Economic Spread Ratio
- The economic spread ratio mirrored the pattern seen in economic profit, with significant negative values at the start, notably -27.3% in 2020, indicating the cost of capital exceeded returns substantially during that year. There was a gradual improvement to -3.47% in 2021, then a positive spread of 10.89% in 2022, suggesting returns exceeded the cost of capital in that year. In 2023, this ratio decreased to 1.86%, indicating a positive but substantially lower margin compared to the previous year.
Economic Profit Margin
Marathon Petroleum Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,190) | 7,574) | (2,204) | (19,160) | (3,330) | |
| Sales and other operating revenues | 148,379) | 177,453) | 119,983) | 69,779) | 123,949) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.80% | 4.27% | -1.84% | -27.46% | -2.69% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -6.31% | 4.18% | -5.45% | -38.51% | — | |
| ConocoPhillips | 0.06% | 12.16% | -2.10% | -53.62% | — | |
| Exxon Mobil Corp. | -0.42% | 6.16% | -0.13% | -35.78% | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × 1,190 ÷ 148,379 = 0.80%
3 Click competitor name to see calculations.
The financial data reveals notable fluctuations in the key performance indicators over the five-year period. The economic profit exhibited significant volatility, with a substantial decline in 2020 followed by a recovery trend in subsequent years.
- Economic Profit
- Economic profit was negative throughout most of the period, with the lowest point observed in 2020 at -19,160 million USD. This sharp decline suggests a period of considerable operational challenges or increased costs during that year. A marked improvement occurred in 2022, when economic profit turned positive at 7,574 million USD, indicating enhanced profitability or cost efficiency. However, the figure decreased again in 2023 to 1,190 million USD, suggesting some degree of profit margin pressure or increased expenses.
- Sales and Other Operating Revenues
- Sales and operating revenues showed considerable variation, declining sharply in 2020 to 69,779 million USD, which likely reflects external market disturbances impacting demand or pricing. The following years saw a robust recovery with revenues peaking at 177,453 million USD in 2022, before slightly easing to 148,379 million USD in 2023. This pattern indicates strong cyclical or market-dependent sales dynamics, with 2022 being a particularly strong year in terms of revenue generation.
- Economic Profit Margin
- The economic profit margin aligns with the trends in economic profit, starting with a negative margin of -2.69% in 2019 and plunging to -27.46% in 2020. This suggests severe operational inefficiency or adverse economic conditions during that year. Subsequently, margins improved significantly, turning positive at 4.27% in 2022, corresponding with the positive economic profit observed. The margin decreased to 0.8% in 2023, which, while still positive, shows tightening profitability and potentially increased cost pressures or softer market conditions.
Overall, the data demonstrates that after a particularly challenging year in 2020, characterized by deep losses and sharply reduced revenues, the company experienced substantial recovery in 2021 and 2022 with improved profitability and sales. Nevertheless, the decline in both economic profit and profit margin in 2023 hints at emerging pressures that could affect future profitability if the trend persists. Continuous monitoring of cost management and market conditions will be crucial to sustain and improve financial performance going forward.