FedEx Corp. (FDX)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

FedEx Corp., FCFF calculation

USD $ in millions

12 months ended	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014	May 31, 2013
Net income	4,572	2,997	1,820	1,050	2,097	1,561
Net noncash charges	3,562	4,135	4,425	4,753	3,415	3,662
Changes in assets and liabilities	(3,460)	(2,202)	(537)	(437)	(1,248)	(535)
Cash provided by operating activities	4,674	4,930	5,708	5,366	4,264	4,688
Cash payments for interest, net of capitalized interest, net of tax¹	550	317	213	130	83	51
Capitalized interest, net of tax²	64	27	28	24	18	29
Capital expenditures	(5,663)	(5,116)	(4,818)	(4,347)	(3,533)	(3,375)
Free cash flow to the firm (FCFF)	(375)	157	1,131	1,173	833	1,393

Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the FedEx Corp.'s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	FedEx Corp.'s FCFF declined from 2016 to 2017 and from 2017 to 2018.

FedEx Corp., interest paid, net of tax calculation

USD $ in millions

12 months ended	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014	May 31, 2013
Effective Income Tax Rate (EITR)

EITR¹	-5.00%	34.60%	33.60%	35.50%	36.30%	36.40%
Interest Paid, Net of Tax
Cash payments for interest, net of capitalized interest, before tax	524	484	321	201	131	80
Less: Cash payments for interest, net of capitalized interest, tax²	(26)	167	108	71	48	29
Cash payments for interest, net of capitalized interest, net of tax	550	317	213	130	83	51
Interest Costs Capitalized, Net of Tax
Capitalized interest, before tax	61	41	42	37	29	45
Less: Capitalized interest, tax³	(3)	14	14	13	11	16
Capitalized interest, net of tax	64	27	28	24	18	29

2018 Calculations

² Cash payments for interest, net of capitalized interest, tax = Cash payments for interest, net of capitalized interest × EITR
= 524 × -5.00% = -26

³ Capitalized interest, tax = Capitalized interest × EITR
= 61 × -5.00% = -3

FedEx Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (USD $ in millions)
Enterprise value (EV)	71,562
Free cash flow to the firm (FCFF)	(375)
Ratio
EV/FCFF	–
Benchmarks
EV/FCFF, Competitors
CSX Corp.	28.95
Union Pacific Corp.	25.26
United Parcel Service Inc.	–
EV/FCFF, Sector
Industrial Transportation	94.09
EV/FCFF, Industry
Industrials	24.78

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

FedEx Corp., historical EV/FCFF calculation, comparison to benchmarks

	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014	May 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)¹	74,531	68,766	53,019	51,868	44,948	30,903
Free cash flow to the firm (FCFF)²	(375)	157	1,131	1,173	833	1,393
Ratio
EV/FCFF³	–	437.03	46.88	44.24	53.96	22.19
Benchmarks
EV/FCFF, Competitors
CSX Corp.	–	23.40	45.00	24.83	33.64	26.03
Union Pacific Corp.	–	22.63	22.39	23.12	33.30	23.86
United Parcel Service Inc.	–	–	27.31	18.08	26.87	16.73
EV/FCFF, Sector
Industrial Transportation	–	85.14	29.26	23.12	32.65	20.61
EV/FCFF, Industry
Industrials	–	24.75	23.33	19.95	19.32	17.17

2018 Calculations

³ EV/FCFF = EV ÷ FCFF
= 74,531 ÷ -375 = –

Ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	FedEx Corp.'s EV/FCFF ratio increased from 2016 to 2017 but then declined significantly from 2017 to 2018.