FedEx CorporationFDXNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $579.70 per share(market-calibrated)

+49.7%

Upside to Fair Value

Current

$387.25

Pure Model

$593.02

Fair Value

$579.70

Bull Case

$759.23

Bear Case

$447.23

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

1.19%

Calibrated Growth

1.88%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $593.02.

What's Driving This Ratingfor FDX

↓

CapEx normalizing toward maintenance

Historical CapEx is 6.38% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$3.6B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 7.24% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $14.0B (11.11% margin).

→

Moderate revenue growth

Analyst consensus projects 5.48% revenue growth, fading to 2.25% by Year 10. Revenue reaches $126.2B (vs $87.9B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $455.57/share (18.0x terminal FCF) while exit multiple gives $730.47/share (29.9x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 1.19% perpetual growth — 106bps below the model's 2.25%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 60.11% indicates efficient cash generation. FCF reaches $12.0B by Year 10 (9.48% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.34

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.51%

Cost of Debt

Pre-tax Cost of Debt1.98%

Tax Rate24.79%

After-tax Cost of Debt1.49%

Equity Weight (E/V)71.55%

Debt Weight (D/V)28.45%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (71.55% × 10.51%) + (28.45% × 1.49%)

= 7.95%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$92.7B	$100.6B	$108.9B	$116.8B	$126.2B
EBIT	$6.7B	$7.3B	$7.9B	$10.9B	$14.0B
Tax	$1.7B	$1.8B	$2.0B	$2.7B	$3.5B
NOPAT	$5.0B	$5.5B	$5.9B	$8.2B	$10.5B
+ Depreciation	$4.3B	$4.7B	$5.1B	$5.4B	$5.9B
- Capex	$5.9B	$5.8B	$5.6B	$5.2B	$4.4B
- Δ NWC	$80M	$67M	$71M	$63M	$46M
Free Cash Flow	$3.4B	$4.3B	$5.4B	$8.3B	$12.0B
Discount Factor	0.926	0.795	0.682	0.586	0.466
Present Value	$3.1B	$3.4B	$3.7B	$4.9B	$5.6B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$12.0B

Terminal Growth Rate2.25%

WACC7.95%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$214.8B

PV of Terminal Value$100.0B

Exit Multiple Method

Year 10 EBITDA$19.9B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$358.3B

PV of Terminal Value$166.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$42.6B

PV of Terminal Value$100.0B

Enterprise Value$142.6B

(-) Net Debt$31.9B

Equity Value$110.7B

Shares Outstanding243M

Price per Share$455.57

Exit Multiple Method

PV of Projected FCFs$42.6B

PV of Terminal Value$166.8B

Enterprise Value$209.4B

(-) Net Debt$31.9B

Equity Value$177.5B

Shares Outstanding243M

Price per Share$730.47

Pure Model Fair Value

$593.02

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
5.95%	$777.25	$814.40	$861.61	$923.59	$1,008.55
6.95%	$654.66	$677.39	$704.96	$739.10	$782.48
7.95%	$560.58	$575.49	$593.02	$613.92	$639.28
8.95%	$485.02	$495.30	$507.11	$520.84	$536.97
9.95%	$422.42	$429.78	$438.09	$447.56	$458.45

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$447.23

15.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.67

Base Case

$593.02

53.1% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.34

Bull Case

$759.23

96.1% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.14

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.48%

Year 3 Revenue Growth4.15%

Year 5 Revenue Growth4.10%

Year 7 Revenue Growth3.36%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin7.24%

Terminal EBIT Margin13.00%

Tax Rate24.79%

Historical Capex / Rev6.38%

Terminal Capex / Rev3.50%

NWC / Revenue1.67%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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