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FedEx (FDX) WACC %

:8.21% (As of Today)
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As of today (2024-04-20), FedEx's weighted average cost of capital is 8.21%%. FedEx's ROIC % is 6.32% (calculated using TTM income statement data). FedEx earns returns that do not match up to its cost of capital. It will destroy value as it grows.

For a comprehensive WACC calculation, please access the WACC Calculator.


FedEx WACC % Historical Data

The historical data trend for FedEx's WACC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

FedEx Annual Data
Trend May14 May15 May16 May17 May18 May19 May20 May21 May22 May23
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 9.96 4.91 6.92 6.32 7.51

FedEx Quarterly Data
May19 Aug19 Nov19 Feb20 May20 Aug20 Nov20 Feb21 May21 Aug21 Nov21 Feb22 May22 Aug22 Nov22 Feb23 May23 Aug23 Nov23 Feb24
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 6.91 7.51 7.62 8.14 7.79

Competitive Comparison

For the Integrated Freight & Logistics subindustry, FedEx's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


FedEx WACC % Distribution

For the Transportation industry and Industrials sector, FedEx's WACC % distribution charts can be found below:

* The bar in red indicates where FedEx's WACC % falls into.



FedEx WACC % Calculation

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

WACC=E/(E + D)*Cost of Equity+D/(E + D)*Cost of Debt*(1 - Tax Rate)

1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, FedEx's market capitalization (E) is $65701.099 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Feb. 2024, FedEx's latest one-year quarterly average Book Value of Debt (D) is $38066.4 Mil.
a) weight of equity = E / (E + D) = 65701.099 / (65701.099 + 38066.4) = 0.6332
b) weight of debt = D / (E + D) = 38066.4 / (65701.099 + 38066.4) = 0.3668

2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 4.621%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. FedEx's beta is 1.32.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 4.621% + 1.32 * 6% = 12.541%

3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Feb. 2024, FedEx's interest expense (positive number) was $384 Mil. Its total Book Value of Debt (D) is $38066.4 Mil.
Cost of Debt = 384 / 38066.4 = 1.0088%.

4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 1541 / 5936 = 25.96%.

FedEx's Weighted Average Cost Of Capital (WACC) for Today is calculated as:

WACC=E / (E + D)*Cost of Equity+D / (E + D)*Cost of Debt*(1 - Tax Rate)
=0.6332*12.541%+0.3668*1.0088%*(1 - 25.96%)
=8.21%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


FedEx  (NYSE:FDX) WACC % Explanation

Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, FedEx's weighted average cost of capital is 8.21%%. FedEx's ROIC % is 6.32% (calculated using TTM income statement data). FedEx earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.

2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.

3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.

4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.


Related Terms

FedEx (FDX) Business Description

Address
942 South Shady Grove Road, Memphis, TN, USA, 38120
FedEx pioneered overnight delivery in 1973 and remains the world's largest express package provider. In its fiscal 2023, which ended May 2023, FedEx derived 47% of revenue from its express division, 37% from ground, and 11% from freight, its asset-based less-than-truckload shipping segment. The remainder comes from other services, including FedEx Office, which provides document production/shipping, and FedEx Logistics, which provides global forwarding. FedEx acquired Dutch parcel delivery firm TNT Express in 2016. TNT was previously the fourth-largest global parcel delivery provider.
Executives
John W Dietrich officer: EVP CHIEF FINANCIAL OFF
Amy B Lane director 1626 EAST JEFFERSON ST, ROCKVILLE MD 20852
Erwin Guy M Ii officer: STAFF VP INT PRIN ACCT OFFICER 942 S SHADY GROVE ROAD, MEMPHIS TN 38120
Jennifer L Johnson officer: CVP PRIN ACCT OFFICER 942 S. SHADY GROVE ROAD, MEMPHIS TN 38120
Michael C. Lenz officer: EVP CHIEF FINANCIAL OFF 942 S. SHADY GROVE ROAD, MEMPHIS TN 38120
Robert B Carter officer: EVP CHIEF INFO OFFICER 942 S SHADY GROVE RD, MEMPHIS TN 38120
Tracy B Brightman officer: EVP - Chief People Officer 942 S SHADY GROVE ROAD, MEMPHIS TN 38120
Stephen E Gorman director 370 KNOLLWOOD STREET, SUITE 500, WINSTON SALEM NC 27103
Susan C Schwab director 2101 VAN MUNCHING HALL, COLLEGE PARK MD 20742
Richard W Smith officer: President/CEO FedEx Express 3610 HACKS CROSS ROAD, BUILDING A 3RD FLOOR, MEMPHIS TN 38125
Frederick W Smith director, officer: CHAIRMAN OF THE BOARD 942 S SHADY GROVE RD, MEMPHIS TN 38120
Brie Carere officer: EVP/Chief Mkt & Comm Officer 942 S. SHADY GROVE ROAD, MEMPHIS TN 38120
David P Steiner director 1001 FANNIN ST, STE 4000, HOUSTON TX 77002
R Brad Martin director
Paul S Walsh director 8 HENRIETTA PLACE, LONDON X0 94111

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