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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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FedEx Corp. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Return on Assets (ROA) since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
12 months ended: | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | |
---|---|---|---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | |||||||
Cost of capital2 | |||||||
Invested capital3 | |||||||
Economic profit4 |
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a significant increase from 2019 to 2021, reaching its peak at 7,163 million US dollars in 2021. However, following this peak, there was a notable decline in 2022 to 5,014 million, with a slight recovery in 2023 to 5,421 million before decreasing again in 2024 to 4,954 million. This pattern indicates considerable volatility in profitability over the period.
- Cost of Capital
- The cost of capital demonstrated a fluctuating but generally upward trend over the six-year period. Starting at 11.36% in 2019, it saw a slight decrease in 2020 to 10.77%, then increased to 12.72% in 2021, and remained relatively high through 2024, peaking at 12.98%. This increase suggests rising capital costs impacting the company's financial structure and investment decisions.
- Invested Capital
- Invested capital steadily increased from 53,043 million US dollars in 2019 to 70,265 million in 2024. The growth was consistent, with an accumulation of approximately 17,222 million US dollars over the six years. This indicates ongoing investment and expansion within the company’s capital base.
- Economic Profit
- Economic profit remained negative throughout the analyzed period, reflecting a failure to generate returns above the cost of capital. The deficit improved significantly from -4,808 million in 2019 to -1,005 million in 2021 but deteriorated again afterward, reaching -4,164 million in 2024. The trend highlights challenges in value creation despite increased invested capital and fluctuating operating profits.
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
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.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
- Net Income
- Net income demonstrates a significant upward trend from 2019 to 2024. Starting at 540 million US dollars in 2019, there is a notable increase to 1,286 million in 2020. The peak occurs in 2021 when net income reaches 5,231 million, followed by a decline to 3,826 million in 2022. Afterward, the figures show a gradual recovery, increasing to 3,972 million in 2023 and further to 4,331 million in 2024. Overall, despite the dip post-2021, the net income remains significantly higher in the latter years compared to the initial periods.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT follows a similar pattern to net income over the examined period. It starts at 1,216 million US dollars in 2019 and more than doubles to 2,531 million in 2020. The highest NOPAT is observed in 2021 with 7,163 million, then declines sharply to 5,014 million in 2022. In subsequent years, there is a slight increase to 5,421 million in 2023, followed by a decrease to 4,954 million in 2024. Despite fluctuations, the NOPAT maintains a level well above the 2019 baseline.
- General Observations
- Both net income and NOPAT exhibit a marked improvement over the six-year span, with substantial growth occurring between 2020 and 2021. However, the decline observed in 2022 suggests potential challenges or one-time impacts affecting profitability during that year. The partial recovery afterward indicates some stabilization but not a full return to the 2021 peak levels. The general trend implies that while profitability improved significantly in the early part of the period, external or internal factors may have contributed to performance variability in the later years.
Cash Operating Taxes
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
The financial data reveals notable fluctuations in the provision for income taxes and cash operating taxes over the six-year period.
- Provision for Income Taxes
- The provision for income taxes exhibits substantial variability. It increased sharply from 115 million in 2019 to 383 million in 2020, followed by a significant jump to 1,443 million in 2021. After this peak, the provision declined to 1,070 million in 2022 but rose again to 1,391 million in 2023 and slightly increased further to 1,505 million in 2024. The trend suggests a volatile tax expense with significant increases from 2019 onwards, possibly reflecting changes in profitability, tax regulations, or accounting adjustments affecting tax provisions.
- Cash Operating Taxes
- Cash operating taxes decreased from 423 million in 2019 to 259 million in 2020, the lowest point in the observed period. Subsequently, there was a steady and marked increase, reaching 893 million in 2021, 983 million in 2022, 1,177 million in 2023, and surging to 1,885 million in 2024. This upward trend indicates increasing cash outflows related to tax payments, which could correspond with higher taxable income or changes in cash tax management practices.
Overall, both tax provision and cash taxes show divergent patterns in early years but align in demonstrating significant increases in recent periods. The growing cash operating taxes in particular suggest rising actual tax payments, potentially linked to higher earnings or adjustments in tax strategies. The disparity between provision and cash taxes in some years could indicate timing differences or non-cash tax effects impacting the provision figures.
Invested Capital
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
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 common stockholders’ investment.
5 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases demonstrate a gradual upward trend from 32,819 million USD in May 2019 to a peak of 38,332 million USD in May 2023, followed by a slight decline to 37,719 million USD in May 2024. This pattern indicates a general increase in debt levels over the five-year period, with a minor reduction in the most recent year.
- Common Stockholders’ Investment
- Common stockholders’ investment shows a consistent and notable increase throughout the entire period, rising from 17,757 million USD in May 2019 to 27,582 million USD in May 2024. The investment growth appears steady, with a particularly significant increase between May 2020 and May 2021, suggesting enhanced equity financing or retained earnings accumulation during these years.
- Invested Capital
- Invested capital increased steadily from 53,043 million USD in May 2019 to 70,265 million USD in May 2024. This growth trend closely follows the combined effect of the rising debt and equity figures, reflecting an enhancement in the overall capital base employed by the company over the analyzed period. The incremental change between successive years slightly slowed down after May 2022, indicating a possible stabilization in capital investment.
Cost of Capital
FedEx Corp., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2024-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2023-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2022-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2021-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2020-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2019-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | |||||||
Economic profit1 | |||||||
Invested capital2 | |||||||
Performance Ratio | |||||||
Economic spread ratio3 | |||||||
Benchmarks | |||||||
Economic Spread Ratio, Competitors4 | |||||||
Uber Technologies Inc. | |||||||
Union Pacific Corp. | |||||||
United Airlines Holdings Inc. | |||||||
United Parcel Service Inc. |
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit displayed a fluctuating trend over the analyzed periods. Starting at a significant negative value of -4808 million US$ in 2019, it improved substantially in 2021 to -1005 million US$, indicating a reduction in economic losses. However, from 2022 onwards, economic profit deteriorated again, reaching -4164 million US$ by 2024. This suggests that profitability challenges persisted or worsened in the latter years.
- Invested Capital
- The invested capital showed a clear upward trend throughout the years. Rising from 53043 million US$ in 2019 to 70265 million US$ in 2024, the incremental increases indicate ongoing investment and asset growth. This continuous accumulation of invested capital could reflect expansion efforts, acquisitions, or reinvestment strategies.
- Economic Spread Ratio
- The economic spread ratio followed a pattern similar to economic profit, albeit expressed as a percentage. It started at a considerably negative -9.06% in 2019 and improved to a relatively smaller negative -1.57% in 2021. Afterward, the ratio worsened again, declining to -5.93% in 2024. This pattern emphasizes that the returns generated on invested capital have consistently fallen short of the cost of capital, with some temporary improvement in 2021.
Economic Profit Margin
May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | |||||||
Economic profit1 | |||||||
Revenue | |||||||
Performance Ratio | |||||||
Economic profit margin2 | |||||||
Benchmarks | |||||||
Economic Profit Margin, Competitors3 | |||||||
Uber Technologies Inc. | |||||||
Union Pacific Corp. | |||||||
United Airlines Holdings Inc. | |||||||
United Parcel Service Inc. |
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of the financial data over the six-year period reveals several noteworthy trends in the company's performance.
- Revenue
- Revenue displayed an overall increasing trend from 2019 through 2022, growing from approximately $69.7 billion in 2019 to a peak of around $93.5 billion in 2022. However, in the subsequent years, revenue declined to about $90.2 billion in 2023 and further to roughly $87.7 billion in 2024. This suggests a growth phase followed by a modest contraction in sales or service income.
- Economic Profit
- The economic profit, which represents the company's net operating profit after subtracting the cost of capital, consistently remained negative throughout the period. The losses narrowed significantly from -$4.8 billion in 2019 to -$1 billion in 2021, indicating an improvement in profitability or capital efficiency. Nevertheless, from 2022 onwards, economic profit deteriorated again, reaching -$4.2 billion in 2024, implying renewed challenges in generating value above the cost of capital.
- Economic Profit Margin
- The economic profit margin mirrored the pattern seen in economic profit, improving from a negative margin of -6.9% in 2019 to a low negative margin of -1.2% in 2021. Subsequently, it worsened to -4.75% by 2024, reflecting a decrease in the profitability relative to revenue and a possible increase in costs or capital charges impacting economic returns.
In summary, while revenue showed initial growth followed by a slight downturn, the company's economic profit and its margin indicate that despite temporary improvement, the firm struggled to maintain sustainable economic gains. The deterioration in both the absolute economic profit and its margin during the latter years signals ongoing challenges in generating value beyond its cost of capital, which may require strategic attention to cost management, operational efficiency, or capital deployment.