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
RTX 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
= 9,351 – 8.97% × 109,085 = -433
The financial performance, as measured by economic profit, demonstrates a pattern of improvement over the five-year period. While initially negative, economic profit trends toward a significantly reduced loss. Net operating profit after taxes (NOPAT) exhibits volatility, while the cost of capital generally increases. Invested capital shows a modest overall increase with some interim fluctuations.
- Economic Profit
- Economic profit begins at a loss of US$4,272 million in 2021 and reaches a loss of only US$433 million by 2025. This represents a substantial improvement in the company’s ability to generate returns exceeding its cost of capital. The largest single-year improvement occurs between 2024 and 2025.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT declines from US$5,054 million in 2021 to US$4,118 million in 2023, indicating a period of decreasing operational profitability. However, a significant recovery is observed in 2024, with NOPAT rising to US$6,483 million, and continuing to increase substantially to US$9,351 million in 2025. This suggests successful implementation of profitability-enhancing strategies or favorable market conditions in the later years.
- Cost of Capital
- The cost of capital experiences a gradual increase over the period, rising from 8.34% in 2021 to 8.97% in 2025. This increase likely reflects changes in market interest rates or the company’s risk profile. Despite the rising cost of capital, the improvement in NOPAT allows for a reduction in the magnitude of the economic loss.
- Invested Capital
- Invested capital decreases slightly from US$111,815 million in 2021 to US$107,593 million in 2024, before increasing to US$109,085 million in 2025. The relatively stable invested capital base, coupled with the substantial increase in NOPAT, contributes to the improved economic profit in the later years. The fluctuations suggest potential asset turnover or capital expenditure adjustments.
In summary, the trend indicates a strengthening financial position. While the company continues to operate at an economic loss, the rate of loss diminishes considerably, driven primarily by substantial growth in NOPAT. The increasing cost of capital presents a continuing challenge, but is offset by the improved operational performance.
Net Operating Profit after Taxes (NOPAT)
RTX Corp., NOPAT calculation
US$ 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 allowance for expected credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to common shareowners.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,052 × 4.30% = 88
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,923 × 21.00% = 404
6 Addition of after taxes interest expense to net income attributable to common shareowners.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 98 × 21.00% = 21
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
Net income attributable to common shareowners and net operating profit after taxes (NOPAT) exhibited distinct performance patterns over the five-year period. While net income demonstrated volatility, NOPAT showed a generally positive trajectory, particularly in the later years.
- Net Income Trend
- Net income attributable to common shareowners increased from US$3,864 million in 2021 to US$5,197 million in 2022, representing a substantial gain. However, this was followed by a decrease to US$3,195 million in 2023. A recovery was observed in 2024, with net income reaching US$4,774 million, and continued growth into 2025, reaching US$6,732 million. This indicates fluctuating profitability for shareowners.
- NOPAT Trend
- NOPAT began at US$5,054 million in 2021, then decreased to US$4,663 million in 2022 and further to US$4,118 million in 2023. A significant increase occurred in 2024, with NOPAT rising to US$6,483 million. This upward trend continued strongly into 2025, reaching US$9,351 million. This suggests improving operational efficiency and profitability, independent of capital structure and taxes.
- Relationship between Net Income and NOPAT
- While both metrics moved in the same general direction (increasing in 2022 and 2025), the magnitude of change differed. The decline in 2023 was more pronounced for net income than for NOPAT. Furthermore, the substantial increase in NOPAT in 2024 and 2025 was greater than the corresponding increase in net income, suggesting potential changes in financing costs or tax rates impacting the bottom line.
- Overall Assessment
- The observed trends suggest a strengthening of core operational profitability, as evidenced by the NOPAT figures. Despite fluctuations in net income, the consistent growth in NOPAT over the latter part of the period indicates improved underlying business performance. Further investigation into the factors driving the divergence between net income and NOPAT would be beneficial.
Cash Operating Taxes
RTX Corp., cash operating taxes calculation
US$ 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 income tax expense demonstrates volatility over the five-year period. Initial values decreased significantly between 2021 and 2023, followed by substantial increases in 2024 and 2025. Conversely, cash operating taxes exhibited a different pattern, with a large increase in 2022, followed by a decrease in 2023, and then a moderate increase through 2024 before declining slightly in 2025.
- Income Tax Expense Trend
- Income tax expense began at US$786 million in 2021, decreasing to US$700 million in 2022, and then falling considerably to US$456 million in 2023. A significant rise occurred in 2024, reaching US$1,181 million, and continued upward to US$1,664 million in 2025. This indicates increasing tax obligations in the latter part of the period.
- Cash Operating Taxes Trend
- Cash operating taxes started at US$1,158 million in 2021, then increased substantially to US$2,635 million in 2022. This was followed by a decrease to US$1,197 million in 2023. Values then rose to US$1,638 million in 2024, before decreasing slightly to US$1,258 million in 2025. The 2022 peak suggests a potentially large, temporary tax payment or a change in tax regulations impacting cash flow.
- Relationship Between Income Tax Expense and Cash Operating Taxes
- A divergence is apparent between income tax expense and cash operating taxes. While income tax expense decreased from 2021 to 2023, cash operating taxes initially increased and then decreased. This suggests timing differences between when taxes are recognized for accounting purposes (income tax expense) and when cash is actually paid (cash operating taxes). The increasing income tax expense in 2024 and 2025 does not directly correlate with the cash operating taxes, which plateaued and then slightly decreased, indicating a potential build-up of deferred tax liabilities or assets.
The fluctuations in both metrics warrant further investigation to understand the underlying drivers, including changes in tax laws, profitability, and the utilization of tax credits or loss carryforwards. The difference between the two figures suggests a significant impact from non-cash tax items.
Invested Capital
RTX Corp., invested capital calculation (financing approach)
US$ 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 allowance for doubtful accounts receivable.
4 Addition of equity equivalents to shareowners’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of assets under construction.
7 Subtraction of marketable securities held in trusts.
The composition of invested capital at RTX Corp. exhibits fluctuations over the five-year period. Total reported debt & leases and shareowners’ equity are the components used to derive invested capital, and their individual trends contribute to the observed patterns.
- Invested Capital Trend
- Invested capital decreased from US$111,815 million in 2021 to US$109,971 million in 2022, representing a decline of approximately 1.7%. A further decrease was noted in 2023, falling to US$108,443 million. 2024 saw a slight reduction to US$107,593 million. However, 2025 witnessed a modest increase, with invested capital rising to US$109,085 million. Overall, the trend suggests relative stability with a slight downward trajectory, followed by a minor recovery in the most recent year.
- Debt & Leases
- Total reported debt & leases increased from US$33,553 million in 2021 to US$33,856 million in 2022, a minor increase. A substantial rise occurred in 2023, reaching US$45,587 million. This was followed by a decrease in 2024 to US$43,260 million, and a further reduction in 2025 to US$39,956 million. The significant increase in 2023, followed by subsequent declines, suggests potential shifts in financing strategies or capital structure adjustments.
- Shareowners’ Equity
- Shareowners’ equity experienced a slight decrease from US$73,068 million in 2021 to US$72,632 million in 2022. A more pronounced decline was observed in 2023, falling to US$59,798 million. A small increase occurred in 2024, reaching US$60,156 million, and a further increase was seen in 2025, with equity rising to US$65,245 million. The decrease in shareowners’ equity, particularly in 2023, may be attributable to factors such as share repurchases, dividend payments, or retained earnings performance.
The interplay between debt & leases and shareowners’ equity shapes the overall invested capital figure. The decrease in invested capital between 2021 and 2024 appears to be driven by a combination of decreasing equity and fluctuating debt levels. The slight increase in invested capital in 2025 is likely due to the combined effect of increased equity and decreased debt.
Cost of Capital
RTX Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 266,659) | 266,659) | ÷ | 304,721) | = | 0.88 | 0.88 | × | 9.74% | = | 8.53% | ||
| Debt3 | 36,010) | 36,010) | ÷ | 304,721) | = | 0.12 | 0.12 | × | 4.50% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 2,052) | 2,052) | ÷ | 304,721) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 304,721) | 1.00 | 8.97% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 173,069) | 173,069) | ÷ | 213,294) | = | 0.81 | 0.81 | × | 9.74% | = | 7.91% | ||
| Debt3 | 38,226) | 38,226) | ÷ | 213,294) | = | 0.18 | 0.18 | × | 4.50% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 1,999) | 1,999) | ÷ | 213,294) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 213,294) | 1.00 | 8.57% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
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 | 122,387) | 122,387) | ÷ | 166,026) | = | 0.74 | 0.74 | × | 9.74% | = | 7.18% | ||
| Debt3 | 41,879) | 41,879) | ÷ | 166,026) | = | 0.25 | 0.25 | × | 4.60% × (1 – 21.00%) | = | 0.92% | ||
| Operating lease liability4 | 1,760) | 1,760) | ÷ | 166,026) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 166,026) | 1.00 | 8.13% | ||||||||||
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 | 143,375) | 143,375) | ÷ | 174,079) | = | 0.82 | 0.82 | × | 9.74% | = | 8.02% | ||
| Debt3 | 28,762) | 28,762) | ÷ | 174,079) | = | 0.17 | 0.17 | × | 4.00% × (1 – 21.00%) | = | 0.52% | ||
| Operating lease liability4 | 1,942) | 1,942) | ÷ | 174,079) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 174,079) | 1.00 | 8.58% | ||||||||||
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 | 142,174) | 142,174) | ÷ | 180,305) | = | 0.79 | 0.79 | × | 9.74% | = | 7.68% | ||
| Debt3 | 36,063) | 36,063) | ÷ | 180,305) | = | 0.20 | 0.20 | × | 4.00% × (1 – 21.00%) | = | 0.63% | ||
| Operating lease liability4 | 2,068) | 2,068) | ÷ | 180,305) | = | 0.01 | 0.01 | × | 2.80% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 180,305) | 1.00 | 8.34% | ||||||||||
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 »
Economic Spread Ratio
RTX 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 | (433) | (2,743) | (4,697) | (4,768) | (4,272) | |
| Invested capital2 | 109,085) | 107,593) | 108,443) | 109,971) | 111,815) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -0.40% | -2.55% | -4.33% | -4.34% | -3.82% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -5.84% | -35.14% | -15.08% | -20.46% | -19.07% | |
| Caterpillar Inc. | -7.19% | -2.60% | -2.66% | -6.57% | -5.96% | |
| Eaton Corp. plc | -5.12% | -6.30% | -7.87% | -9.77% | -9.38% | |
| GE Aerospace | 3.07% | -0.81% | 1.02% | -13.89% | -18.80% | |
| Honeywell International Inc. | -4.83% | -3.86% | -2.00% | -2.97% | -1.88% | |
| Lockheed Martin Corp. | 13.32% | 12.29% | 18.74% | 14.78% | 15.76% | |
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 × -433 ÷ 109,085 = -0.40%
4 Click competitor name to see calculations.
The economic spread ratio demonstrates a consistent, though moderating, improvement over the five-year period. Initially negative and substantial, the ratio moves closer to zero, indicating a diminishing gap between the company’s return on invested capital and its cost of capital.
- Economic Spread Ratio
- In 2021, the economic spread ratio stood at -3.82%. This signifies that the company’s return on invested capital was 3.82% lower than its cost of capital. The ratio worsened slightly in 2022, reaching -4.34%, and remained relatively stable at -4.33% in 2023, suggesting continued underperformance relative to the cost of capital.
- A noticeable shift occurs in 2024, with the economic spread ratio improving to -2.55%. This indicates a reduction in the difference between the return on invested capital and the cost of capital. The trend continues into 2025, with a further improvement to -0.40%, suggesting the company is nearing a point where its return on invested capital is approaching its cost of capital.
The trend in economic profit mirrors the improvement in the economic spread ratio. While economic profit remains negative throughout the period, the magnitude of the loss decreases significantly. The reduction in negative economic profit from US$-4,768 million in 2022 to US$-433 million in 2025 aligns with the narrowing negative spread.
- Invested Capital
- Invested capital exhibits a generally decreasing trend from US$111,815 million in 2021 to US$107,593 million in 2024. However, it experiences a slight increase in 2025, reaching US$109,085 million. This fluctuation in invested capital should be considered alongside the changes in economic profit and the economic spread ratio to understand the overall financial performance.
The observed improvements in the economic spread ratio and the reduction in negative economic profit suggest a positive trajectory in the company’s ability to generate returns on its invested capital. However, continued monitoring is necessary to determine if this trend will lead to positive economic profit in future periods.
Economic Profit Margin
RTX Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (433) | (2,743) | (4,697) | (4,768) | (4,272) | |
| Net sales | 88,603) | 80,738) | 68,920) | 67,074) | 64,388) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -0.49% | -3.40% | -6.82% | -7.11% | -6.63% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -3.50% | -26.56% | -8.70% | -15.63% | -15.14% | |
| Caterpillar Inc. | -7.27% | -2.44% | -2.31% | -6.36% | -6.87% | |
| Eaton Corp. plc | -6.44% | -8.08% | -10.66% | -14.50% | -14.08% | |
| GE Aerospace | 2.80% | -0.87% | 0.80% | -12.59% | -18.98% | |
| Honeywell International Inc. | -7.84% | -6.05% | -2.64% | -3.92% | -2.63% | |
| Lockheed Martin Corp. | 5.39% | 4.98% | 7.61% | 5.96% | 6.73% | |
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 ÷ Net sales
= 100 × -433 ÷ 88,603 = -0.49%
3 Click competitor name to see calculations.
The economic profit margin exhibited a consistent, though moderating, improvement over the five-year period. Initially negative and substantial, the margin moved closer to zero, indicating a reduction in the disparity between economic profit and net sales.
- Economic Profit Margin Trend
- In 2021, the economic profit margin stood at -6.63%. This figure deteriorated slightly in 2022, reaching -7.11%, representing the lowest point in the observed period. A modest improvement was noted in 2023, with the margin increasing to -6.82%. The rate of improvement accelerated in 2024, with the margin reaching -3.40%, and continued into 2025, culminating in a margin of -0.49%.
The progression of the economic profit margin suggests a strengthening of the company’s ability to generate returns exceeding its cost of capital. While still negative throughout the period, the decreasing magnitude of the negative margin indicates a positive trajectory. The most significant shift occurred between 2024 and 2025, suggesting a potentially impactful change in operational efficiency or capital allocation during that timeframe.
- Relationship to Net Sales
- Net sales demonstrated a consistent upward trend throughout the period, increasing from US$64,388 million in 2021 to US$88,603 million in 2025. This growth in sales occurred concurrently with the improvement in the economic profit margin, suggesting that increased revenue contributed to the narrowing gap between economic profit and net sales. However, the initial decline in margin from 2021 to 2022, despite rising sales, indicates that factors beyond revenue growth were also influencing profitability.
The economic profit figures themselves, while not the primary focus, corroborate the margin analysis. The reduction in the absolute value of economic profit from US$-4,768 million in 2022 to US$-433 million in 2025 aligns with the observed improvement in the economic profit margin.