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FedEx Corp. (FDX)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Free Cash Flow to The Firm (FCFF)

FedEx Corp., FCFF calculation

USD $ in millions

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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 

Based on: 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14), 10-K (filing date: 2013-07-15).

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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.

Interest Paid, Net of Tax

FedEx Corp., interest paid, net of tax calculation

USD $ in millions

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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 

Based on: 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14), 10-K (filing date: 2013-07-15).

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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

Enterprise Value to FCFF Ratio, Current

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

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 64,160 
Free cash flow to the firm (FCFF) (375)
Ratio
EV/FCFF –
Benchmarks
EV/FCFF, Competitors
CSX Corp. 27.68
Union Pacific Corp. 24.57
United Parcel Service Inc. –
EV/FCFF, Sector
Industrial Transportation 88.30
EV/FCFF, Industry
Industrials 22.66

Based on: 10-K (filing date: 2018-07-16).

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.

Enterprise Value to FCFF Ratio, Historical

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

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14), 10-K (filing date: 2013-07-15).

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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.