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 – 14.98% × 63,897 = 1,210
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT exhibited significant volatility over the five-year period. Initially, it registered a strong positive figure of 6,182 million USD at the end of 2019. However, there was a sharp decline in 2020, resulting in a substantial negative NOPAT of -10,978 million USD. The following years saw a recovery, with NOPAT returning to positive values: 6,187 million USD in 2021, rising markedly to 17,951 million USD in 2022, before declining again to 10,783 million USD in 2023. This pattern suggests considerable fluctuations in operating profitability, likely influenced by extraordinary or cyclical factors.
- Cost of Capital
- The cost of capital showed a consistent upward trend throughout the period. Starting at 11.58% at the end of 2019, it increased slightly to 11.63% in 2020, then rose more sharply to 13.17% in 2021. This increasing trend continued, reaching 14.89% in 2022 and peaking at 14.98% in 2023. The rising cost of capital indicates growing risk or higher expected returns demanded by investors over time.
- Invested Capital
- Invested capital followed a decreasing trend with some fluctuations. From 82,004 million USD at the end of 2019, it decreased to 70,186 million USD in 2020, and further declined to 63,579 million USD in 2021. There was a rebound in 2022 to 69,547 million USD, but it fell again to 63,897 million USD in 2023. This decline suggests the company reduced its capital base over the period or possibly disposed of assets, with a partial recovery in 2022.
- Economic Profit
- The economic profit showed considerable negative values early on, followed by improvement in later years. It was negative in 2019 (-3,312 million USD), more severely negative in 2020 (-19,144 million USD), and still negative in 2021 (-2,186 million USD). However, a significant turnaround occurred in 2022, with a positive economic profit of 7,597 million USD. This gain decreased to 1,210 million USD in 2023. The initial negative readings indicate that returns did not cover the cost of capital, whereas the positive values in the last two years signal the generation of value above the capital cost.
- Overall Analysis
- There is a clear pattern of recovery and improvement in profitability metrics from 2020 onwards after a substantial downturn. Despite the increasing cost of capital—a potential challenge—the company managed to achieve positive economic profit in the last two years, indicating enhanced value creation. The decrease in invested capital suggests a strategic capital restructuring or asset management. The volatility in NOPAT highlights operational challenges but the strong rebound by 2022 suggests improved operational performance or market conditions.
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 | × | 20.12% | = | 13.87% | ||
| 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 | 14.98% | ||||||||||
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 | × | 20.12% | = | 13.78% | ||
| 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 | 14.89% | ||||||||||
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 | × | 20.12% | = | 11.73% | ||
| 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 | 13.17% | ||||||||||
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 | × | 20.12% | = | 9.85% | ||
| 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 | 11.63% | ||||||||||
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 | × | 20.12% | = | 9.67% | ||
| 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 | 11.58% | ||||||||||
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 | 1,210) | 7,597) | (2,186) | (19,144) | (3,312) | |
| Invested capital2 | 63,897) | 69,547) | 63,579) | 70,186) | 82,004) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 1.89% | 10.92% | -3.44% | -27.28% | -4.04% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -5.84% | 4.66% | -4.36% | -18.42% | — | |
| ConocoPhillips | 0.06% | 12.66% | -1.24% | -19.78% | — | |
| 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 × 1,210 ÷ 63,897 = 1.89%
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced significant fluctuations over the analyzed periods. Initially, there was a considerable negative value of -3312 million USD, which worsened substantially to -19144 million USD by the end of 2020. This was followed by a partial recovery in 2021, with a reduced loss of -2186 million USD. The trend then shifted positively in 2022, recording a profit of 7597 million USD, before declining again to 1210 million USD in 2023. Overall, the economic profit demonstrated volatility, with a notable loss in 2020 and a rebound in the subsequent years.
- Invested Capital
- The invested capital showed a generally declining trend across the years. Beginning at 82004 million USD in 2019, it decreased to 70186 million USD in 2020 and further dropped to 63579 million USD in 2021. There was a recovery in 2022, reaching 69547 million USD, followed by another decline to 63897 million USD in 2023. This pattern indicates a reduction in invested capital overall, with a moderate recovery in 2022 before falling again.
- Economic Spread Ratio
- The economic spread ratio mirrored the fluctuations seen in economic profit. The ratio was negative throughout 2019 to 2021, with a sharp decrease from -4.04% in 2019 to -27.28% in 2020, followed by a smaller negative figure of -3.44% in 2021. A turnaround occurred in 2022, with a positive spread of 10.92%, signaling improved economic value generation. This positive trend reduced significantly to 1.89% in 2023. The ratio indicates challenges in generating returns above the cost of capital during the earlier years, improving markedly in 2022 before diminishing again.
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 | 1,210) | 7,597) | (2,186) | (19,144) | (3,312) | |
| Sales and other operating revenues | 148,379) | 177,453) | 119,983) | 69,779) | 123,949) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.82% | 4.28% | -1.82% | -27.43% | -2.67% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -6.29% | 4.19% | -5.43% | -38.48% | — | |
| ConocoPhillips | 0.09% | 12.18% | -2.07% | -53.57% | — | |
| 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 × 1,210 ÷ 148,379 = 0.82%
3 Click competitor name to see calculations.
- Sales and other operating revenues
- The revenues exhibited significant fluctuations over the examined periods. There was a marked decline from approximately $123.9 billion to around $69.8 billion between the end of 2019 and 2020. This was followed by a strong recovery in 2021, approaching $120 billion, and a further substantial increase to about $177.5 billion by the end of 2022. Subsequently, revenues decreased to approximately $148.4 billion in 2023. Overall, despite volatility, there is an upward trend in revenues compared to the 2019 baseline.
- Economic profit
- The economic profit metric showed considerable volatility with notable negative values throughout most years. It started with a loss of roughly $3.3 billion in 2019, which worsened dramatically to a loss near $19.1 billion in 2020. Improvements occurred in 2021 with a significantly reduced loss of approximately $2.2 billion. By 2022, economic profit turned positive, reaching about $7.6 billion. However, it declined again to a positive but lower figure of around $1.2 billion in 2023. This pattern indicates a substantial recovery starting in 2021 but with reduced momentum into 2023.
- Economic profit margin
- The margin showed a similar pattern to economic profit, reflecting profitability relative to sales. It was negative at around -2.67% in 2019, deepened substantially to -27.43% in 2020, signaling a period of significant losses relative to sales. Recovery began in 2021 with the margin improving to about -1.82%, then shifted to positive territory in 2022 at 4.28%, indicating profitability from operations during that period. The margin decreased in 2023 to 0.82%, still positive but reflecting a reduction in operational profitability compared to 2022.
- Summary
- The financial performance over the years reveals a cycle affected likely by external and internal factors causing sharp declines in revenue and profitability around 2020. The rebound in revenues and economic profit after 2020 reflects operational recovery and improved efficiency. However, the decreased profit margin in 2023 despite strong revenues suggests rising costs or other factors impacting profitability. Continuous monitoring and analysis would be necessary to determine causative factors behind these trends and to guide strategic financial decisions.