Category: Cash Flow

The FactSet “Cash & Investment Quarterly” (pdf) dated December 19, 2013 highlights a variety of statistics regarding S&P500 cash and cash generation activities.

One aspect that is discussed and depicted is that of free cash flow.

An excerpt from page 2 regarding free cash flow:

Another major factor for cash growth was large cash inflows from operations. S&P 500 companies generated $351.3 billion in free cash flow in Q3, the second largest amount in at least ten years. This amounted to 7.2% growth year-over-year, and, as a result of slower growth in fixed capital expenditures (+2.2%), free cash flow (operating cash flow less fixed capital expenditures) grew at a higher rate of 11.3%. Free cash flows were also at their second highest quarterly level ($196.8 billion) in Q3.

Eight of the nine sectors under consideration grew free cash flow year-over-year, led by the Energy sector (+208%). However, the Energy sector frequently has volatile or low free cash flow, which distorts the growth rate. The Health Care sector, on the other hand, grew free cash flow at an impressive 21.4%, despite generating over $32 billion in free cash in the year-ago period. Pfizer ($5.6B), Johnson & Johnson ($5.1B), UnitedHealth Group ($3.0B), and Merck ($3.6B) led the sector in the generation of free cash flow.

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On May 28, the Wall Street Journal’s “CFO Report” published an article titled “Free-Cash Flow Falls at Big Companies.”  The article mentions statistics and comments concerning the free cash flow trends at the largest 1000 publicly-traded companies in the U.S.

An excerpt:

The amount of free-cash flow recorded by 1,000 of the largest public companies in the U.S. by revenue fell to $565 billion for 2012, down 14% from 2011, according to REL, a division of Hackett Group. Free-cash flow measures the cash that companies have after they have paid off all their expenses. The decline recorded between 2011 and 2012 is the first since 2007.

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StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

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StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and offers corporations and businesses advice, strategies, and actionable methods on how to increase revenue and profitability.