Stock Analysis on Net

Verizon Communications Inc. (NYSE:VZ)

Economic Value Added (EVA)

Microsoft Excel

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

Verizon Communications Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net operating profit after taxes (NOPAT)1 19,452 28,039 29,903 24,311 25,313
Cost of capital2 6.99% 6.87% 7.11% 7.22% 7.22%
Invested capital3 304,400 301,478 290,004 247,730 220,656
 
Economic profit4 (1,835) 7,333 9,285 6,427 9,370

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
= 19,4526.99% × 304,400 = -1,835

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Verizon Communications Inc. economic profit decreased from 2021 to 2022 and from 2022 to 2023.

Net Operating Profit after Taxes (NOPAT)

Verizon Communications Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net income attributable to Verizon 11,614 21,256 22,065 17,801 19,265
Deferred income tax expense (benefit)1 2,388 2,973 4,264 1,553 1,232
Increase (decrease) in allowance for credit losses2 191 (70) (356) 519 (32)
Increase (decrease) in equity equivalents3 2,579 2,903 3,908 2,072 1,200
Interest expense 5,524 3,613 3,485 4,247 4,730
Interest expense, operating lease liability4 874 822 839 752 866
Adjusted interest expense 6,398 4,435 4,324 4,999 5,596
Tax benefit of interest expense5 (1,344) (931) (908) (1,050) (1,175)
Adjusted interest expense, after taxes6 5,054 3,504 3,416 3,949 4,421
(Gain) loss on marketable securities 5 (1) (9) (1)
Interest income (354) (146) (48) (65) (121)
Investment income, before taxes (349) (146) (49) (74) (122)
Tax expense (benefit) of investment income7 73 31 10 16 26
Investment income, after taxes8 (276) (115) (39) (58) (96)
Net income (loss) attributable to noncontrolling interest 481 492 553 547 523
Net operating profit after taxes (NOPAT) 19,452 28,039 29,903 24,311 25,313

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 credit losses.

3 Addition of increase (decrease) in equity equivalents to net income attributable to Verizon.

4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 24,268 × 3.60% = 874

5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 6,398 × 21.00% = 1,344

6 Addition of after taxes interest expense to net income attributable to Verizon.

7 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 349 × 21.00% = 73

8 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Verizon Communications Inc. NOPAT decreased from 2021 to 2022 and from 2022 to 2023.

Cash Operating Taxes

Verizon Communications Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Income tax provision 4,892 6,523 6,802 5,619 2,945
Less: Deferred income tax expense (benefit) 2,388 2,973 4,264 1,553 1,232
Add: Tax savings from interest expense 1,344 931 908 1,050 1,175
Less: Tax imposed on investment income 73 31 10 16 26
Cash operating taxes 3,774 4,451 3,436 5,100 2,863

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).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Verizon Communications Inc. cash operating taxes increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Invested Capital

Verizon Communications Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Debt maturing within one year 12,973 9,963 7,443 5,889 10,777
Long-term debt, excluding maturing within one year 137,701 140,676 143,425 123,173 100,712
Operating lease liability1 24,268 25,692 27,062 21,485 21,654
Total reported debt & leases 174,942 176,331 177,930 150,547 133,143
Equity attributable to Verizon 92,430 91,144 81,790 67,842 61,395
Net deferred tax (assets) liabilities2 45,633 43,268 40,517 35,623 34,619
Allowance for credit losses3 1,017 826 896 1,252 733
Equity equivalents4 46,650 44,094 41,413 36,875 35,352
Accumulated other comprehensive (income) loss, net of tax5 1,380 1,865 927 71 (998)
Noncontrolling interests 1,369 1,319 1,410 1,430 1,440
Adjusted equity attributable to Verizon 141,829 138,422 125,540 106,218 97,189
Work in progress6 (12,092) (12,889) (13,057) (8,576) (9,234)
Marketable securities7 (279) (386) (409) (459) (442)
Invested capital 304,400 301,478 290,004 247,730 220,656

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 equity equivalents to equity attributable to Verizon.

5 Removal of accumulated other comprehensive income.

6 Subtraction of work in progress.

7 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Verizon Communications Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Cost of Capital

Verizon Communications Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 166,994 166,994 ÷ 338,963 = 0.49 0.49 × 8.40% = 4.14%
Short-term and long-term debt, including finance leases3 147,701 147,701 ÷ 338,963 = 0.44 0.44 × 7.70% × (1 – 21.00%) = 2.65%
Operating lease liability4 24,268 24,268 ÷ 338,963 = 0.07 0.07 × 3.60% × (1 – 21.00%) = 0.20%
Total: 338,963 1.00 6.99%

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 168,037 168,037 ÷ 334,502 = 0.50 0.50 × 8.40% = 4.22%
Short-term and long-term debt, including finance leases3 140,773 140,773 ÷ 334,502 = 0.42 0.42 × 7.38% × (1 – 21.00%) = 2.45%
Operating lease liability4 25,692 25,692 ÷ 334,502 = 0.08 0.08 × 3.20% × (1 – 21.00%) = 0.19%
Total: 334,502 1.00 6.87%

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 223,828 223,828 ÷ 421,420 = 0.53 0.53 × 8.40% = 4.46%
Short-term and long-term debt, including finance leases3 170,530 170,530 ÷ 421,420 = 0.40 0.40 × 7.79% × (1 – 21.00%) = 2.49%
Operating lease liability4 27,062 27,062 ÷ 421,420 = 0.06 0.06 × 3.10% × (1 – 21.00%) = 0.16%
Total: 421,420 1.00 7.11%

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 233,805 233,805 ÷ 413,326 = 0.57 0.57 × 8.40% = 4.75%
Short-term and long-term debt, including finance leases3 158,036 158,036 ÷ 413,326 = 0.38 0.38 × 7.69% × (1 – 21.00%) = 2.32%
Operating lease liability4 21,485 21,485 ÷ 413,326 = 0.05 0.05 × 3.50% × (1 – 21.00%) = 0.14%
Total: 413,326 1.00 7.22%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 240,707 240,707 ÷ 392,677 = 0.61 0.61 × 8.40% = 5.15%
Short-term and long-term debt, including finance leases3 130,316 130,316 ÷ 392,677 = 0.33 0.33 × 7.25% × (1 – 21.00%) = 1.90%
Operating lease liability4 21,654 21,654 ÷ 392,677 = 0.06 0.06 × 4.00% × (1 – 21.00%) = 0.17%
Total: 392,677 1.00 7.22%

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Verizon Communications Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit1 (1,835) 7,333 9,285 6,427 9,370
Invested capital2 304,400 301,478 290,004 247,730 220,656
Performance Ratio
Economic spread ratio3 -0.60% 2.43% 3.20% 2.59% 4.25%
Benchmarks
Economic Spread Ratio, Competitors4
AT&T Inc. 0.14% -6.62% 0.89% -6.08% -2.34%
T-Mobile US Inc. 0.60% -3.18% -3.19% -2.67% 0.70%

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 × -1,835 ÷ 304,400 = -0.60%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Verizon Communications Inc. economic spread ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

Economic Profit Margin

Verizon Communications Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit1 (1,835) 7,333 9,285 6,427 9,370
Operating revenues 133,974 136,835 133,613 128,292 131,868
Performance Ratio
Economic profit margin2 -1.37% 5.36% 6.95% 5.01% 7.11%
Benchmarks
Economic Profit Margin, Competitors3
AT&T Inc. 0.38% -16.96% 2.31% -14.58% -5.65%
T-Mobile US Inc. 1.41% -7.45% -7.35% -6.90% 1.13%

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 ÷ Operating revenues
= 100 × -1,835 ÷ 133,974 = -1.37%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Verizon Communications Inc. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.