Over the past year, PepsiCo (PEP) has been making the right moves. Perhaps one of the biggest was to buy up its key bottlers in the U.S. so as to improve cost efficiencies, as well as to broaden the product mix. In fact, Coca-Cola (KO) also realized the logic of this strategy and is doing the same thing.

And keeping up the momentum, PepsiCo did something else to make shareholders happy. Monday, the company announced it has approved a 7% increase in its dividend and there a whopping $15 billion authorization to repurchase up to $15 billion in shares of the company.

Continue reading Pepsi to Drink Up $15 Billion in Stock Buybacks

Pepsi to Drink Up $15 Billion in Stock Buybacks originally appeared on BloggingStocks on Mon, 15 Mar 2010 11:40:00 EST. Please see our terms for use of feeds.

Share buybacks look foolish in retrospect originally appeared on BloggingStocks on Mon, 06 Oct 2008 13:53:00 EST. Please see our terms for use of feeds.

Nvidia (NASDAQ: NVDA) turned in putrid earnings. It also announced that it would buy back a ton of its own shares.

The graphics chip company took a charge of nearly $200 million in its last quarter for product problems. Nvidia also admitted it did not see strong competition coming from rival AMD (NYSE: AMD). Nvidia lost $120 million in the quarter and revenue dropped slightly. Under most circumstances, especially in a weak market, the company's shares would be punished.

But according to The Wall Street Journal, "On a positive note, Nvidia announced a $1 billion increase to its stock-buyback program." For a company with a market cap of only $6 billion that is a big deal.

Share buybacks often do not do much for a company's stock price, but in a market where earnings are having a rough time in most sectors, the idea that EPS can be pushed up by a falling number of shares in the float could become more attractive. It is a form of "reverse dilution," which could find a new place in a bear market.

Nvidia share shares rose 10% after hours [shares are rising 6% in premarket as of 8:10 a.m.]. It may be a signal to management at other companies that buybacks are a sign that a firm thinks its shares are undervalued. The market cares more about that than it used to.

Douglas A. McIntyre is an editor at 247wallst.com.

Nvidia, finally a stock buyback that works originally appeared on BloggingStocks on Wed, 13 Aug 2008 08:55:00 EST. Please see our terms for use of feeds.

The Wall Street Journal

Share buybacks backfire originally appeared on BloggingStocks on Wed, 09 Apr 2008 09:58:00 EST. Please see our terms for use of feeds.

Kudos to Apple for resisting buyback pressure originally appeared on BloggingStocks on Wed, 05 Mar 2008 13:50:00 EST. Please see our terms for use of feeds.

At Apple Inc.'s (NASDAQ: AAPL) annual meeting, the company had an opportunity to calm upset investors. With its stock down from $202 to $124 in just a little over two months, throwing shareholders a bone might have been a good idea.

Apple currently has $20 billion in cash and short-term investments. The company almost never buys other companies. It does not need the money for capital expenditures. Each quarter, the cash balance gets larger.

Apple's faithful are concerned, with good reason, that iPod sales may be slowing. There has been doubt voiced about whether the company can hit its ambitious iPhone sales targets. The economy could also catch up with Apple. PCs and consumer electronics are not essentials when money gets tight.

Apple could have announced a share buy-back or created a dividend. Some critics would say that a "growth stock" is not an investment for yield investors. But for the time being Apple is not a growth stock. Giving loyal investors a little cash back would not have been such a bad idea.

Steve Jobs probably thinks he knows what is right for people who own stock in his company. Some investors are probably losing patience with that. Not everyone is a billionaire.

Douglas A. McIntyre is an editor at 247wallst.com.

A mistake at Apple (AAPL): No share buyback originally appeared on BloggingStocks on Wed, 05 Mar 2008 13:38:00 EST. Please see our terms for use of feeds.

Continue reading Stock buybacks not adding value like they used to

Stock buybacks not adding value like they used to originally appeared on BloggingStocks on Mon, 17 Dec 2007 09:20:00 EST. Please see our terms for use of feeds.

• According to the Wall Street Journal's "Heard on the Street," as the economy continues to slow and the credit markets face further turmoil, high-profile companies like Countrywide Financial Corporation (NYSE: CFC) and The Home Depot Inc (NYSE: HD) are cutting back on buybacks as their shares drop.
• The New York Times reported that BlackRock Inc (NYSE: BLK) is expected to be the main asset manager for a $75B fund being created by Bank of America Corporation (NYSE: BAC), Citigroup Incorporated (NYSE: C), and JP Morgan Chase & Co (NYSE: JPM) to help stabilize the market fJor asset-backed securities, according to a source. The Bank of New York Mellon Corporation (NYSE: BK) is reportedly a leading contender to be a custodian of the fund.

• A ruling in Vodafone Group Plc's (NYSE: VOD) favor may cause Apple Inc (NASDAQ: AAPL) to rethink its business model for the iPhone device. The injunction against Deutsche Telekom AG (NYSE: DT)'s T-Mobile unit may force Apple to "unlock" its iPhones, the UK Times reported.
• Struggling airline UAL Corporation (NASDAQ: UAUA), along with its unit United Airlines, is struggling, but finding a carrier willing to merge may be a problem, BusinessWeek speculated.

Newspaper wrap-up: Countrywide, Home Depot cut back on buybacks originally appeared on BloggingStocks on Wed, 21 Nov 2007 09:15:00 EST. Please see our terms for use of feeds.

Standard & Poor's has studied the impact of stock buybacks and reached some pretty disconcerting findings. As stock buybacks have soared in popularity and become a favorite demand of activist investors, S&P found that they might not be so great after all.

As the company put it: "Conventional wisdom holds that (1) stock prices go up as a result of buybacks, (2) more buybacks are better than fewer buybacks, and (3) announced share buybacks actually reduce the number of outstanding shares significantly.

"Based on a study of buybacks conducted by S&P's Equity Research Services of the 18 months ended June 30, 2007, we believe that all three points were unsupported by the data during that period."

This may be true, but I'm still a fan of buybacks. When no compelling internal growth opportunities can be found, buying back stock is a lot better from a tax perspective than returning cash to shareholders the traditional way: dividends. Changes in the tax code could very well make buybacks obsolete.

One of the reasons for the declining performance of buybacks could be the motivation behind them. If they are done because the stock is undervalued and the company wants to return money to shareholders, that's great. But here's what Warren Buffett had to say about buybacks:

Continue reading Study shows stock buybacks fail to create value ... on average

Study shows stock buybacks fail to create value ... on average originally appeared on BloggingStocks on Sat, 17 Nov 2007 19:40:00 EST. Please see our terms for use of feeds.

Dell (NASDAQ: DELL) has filed all of its past due quarterly financial statements with the SEC. That means that the Nasdaq no longer has a reason to delist that company. It also means that the PC company can begin its huge share buyback program again.

Dell sent in the filings after an investigation "found that senior executives and other employees manipulated the company's financial statements to give the appearance of hitting quarterly performance goals," according to The Wall Street Journal [subscription required]. The adjustment to net income for the four years was a modest $92 million.

In 2005, Dell's board had set up a plan to buy back as much as $10 billion worth of shares. But the investigation of accounting problems covered fiscal years 2003 through 2006, and the program was suspended.

With a market cap of $66 billion, buying $10 billion in shares could give earnings per share a very big lift.

Douglas A. McIntyre is an editor at 247wallst.com.

Dell restarts share buyback originally appeared on BloggingStocks on Wed, 31 Oct 2007 09:13:00 EST. Please see our terms for use of feeds.

Continue reading Credit crunch slows buybacks

Credit crunch slows buybacks originally appeared on BloggingStocks on Tue, 18 Sep 2007 16:30:00 EST. Please see our terms for use of feeds.

A piece on FinancialWeek.com looks at an interesting conflict of interest: Companies buying back their own stock while insiders dump their own shares. It looks really bad:

...according to a Financial Week analysis of the 50 largest buybacks, at several of these companies, chief executives sold sizable chunks of stock while the buybacks were ongoing. What's more, the size of those sales exceeded, and in most cases dwarfed, their stock sales in the 12 months before the buybacks were announced.

Because share buybacks prop up the price of a stock, the effect is that these executives may be using shareholders' money to increase the price they can get for their own shares, as they dump them into the buyback. In addition, the analysis found that companies where insiders receive bonuses related to earnings per share targets are more likely to engage in aggressive buybacks. reducing the number of shares increases EPS.

Here's what Warren Buffett once wrote about buybacks:

"Now, repurchases are all the rage, but are all too often made for an unstated and, in our view, ignoble reason, to pump up or support the stock price. The shareholder who chooses to sell today, of course, is benefited by any buyer, whatever his origin or motives. But the continuing shareholder is penalized by repurchases above intrinsic value. Buying dollar bills for $1.10 is not good business for those who stick around."

This all looks very fishy, and could, and probably should, emerge as the next major corporate governance scandal.

Are insiders using buybacks as a dumping opportunity? originally appeared on BloggingStocks on Mon, 17 Sep 2007 14:51:00 EST. Please see our terms for use of feeds.

Shares of Expedia (NASDAQ: EXPE) continued their descent today after the company announced that it was slashing it share repurchase program by almost 80%, down to $720 million from an original plan of $3.35 billion. The reason? According to the company's Chairman Barry Diller, "While we remain confident in Expedia's long-term prospects and will continue to be net buyers of our shares, the terms available to us in the current debt market environment were simply unacceptable."

The ramifications here could be much broader than just Expedia. A few weeks ago, I wrote a piece called Buybacks buoy the bull. According to the Wall Street Journal, ""Companies are buying back their shares at a furious pace, one of the big reasons the Dow Jones Industrial Average is pushing toward 14000... Companies have increasingly resorted to buybacks -- which boost stock prices and per-share earnings by reducing the supply of stock in public hands -- as a way to return cash to shareholders. In doing so, they have supercharged the stock market's rally."

I love share buybacks -- it's the most efficient way to return money to shareholders. But increasingly, companies have been borrowing money to do it, and the continued tightening in the credit market could mess up buyback plans at a lot of companies, not just Expedia.

If buybacks have indeed been a big factor in the market's rise (It's so hard to isolate any one factor), a slowdown could stop the bull in its tracks.

Expedia slashes buyback -- more to follow? originally appeared on BloggingStocks on Tue, 24 Jul 2007 19:45:00 EST. Please see our terms for use of feeds.

Expedia Inc. (NASDAQ: EXPE), the online travel company, announced that it would buyback 116.7 million shares. That was in June. The company's shares quickly jumped from under $24 to $29.

Today, the company announced that the share purchase program would be reduced to 25 million shares. The stock will be bought in a price range of $27.50 to $30.00. On the announcement, Expedia's price promptly dropped to $26.50, about 9% down.

Bloomberg quotes Expedia Chairman Barry Diller as saying, "The terms available to us in the current debt market environment were simply unacceptable." The company would have added $3.5 billion in debt to cover buying back the stock.

What happened? Well, credit is getting tighter, but it is never too tight for really attractive deals. The company is not exactly minting money. In the last reported quarter, net income was $38 million on revenue of $551 million. Interest payments for the quarter were about $11 million. With the additional $3.5 billion of debt on the books, interest payments could have gone up as much as 7 times. And there would not be a good enough ratio of operating income to the sum of the old debt plus the new borrowing Expedia would have made to buy the 116.7 million shares.

The simple reason that there may not have been debt available at good interest rates is that earnings would not support it.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Expedia: A misstep for Barry Diller originally appeared on BloggingStocks on Mon, 23 Jul 2007 12:28:00 EST. Please see our terms for use of feeds.

The Wall Street Journal offers an interesting explanation for the sustained bull run: "Companies are buying back their shares at a furious pace, one of the big reasons the Dow Jones Industrial Average is pushing toward 14000... Companies have increasingly resorted to buybacks -- which boost stock prices and per-share earnings by reducing the supply of stock in public hands -- as a way to return cash to shareholders. In doing so, they have supercharged the stock market's rally."

But while the Journal seems to see this as an unsustainable phenomenon, asking "How long can they keep up?"

But I believe that the shift may be sustainable: Given the unfavorable tax treatment of dividends compared to buybacks, a shift toward buyback should cause share prices to rise. It's a more efficient way for corporations to allocate capital. In addition to the boost to EPS caused by buybacks, it is rational for investors to flock toward companies buying back shares.

It's possible that the pace of buybacks will slow down but if the bull does turn into a bear, I don't that will be looked as one of the reasons for the downturn.

Buybacks buoy the bull? originally appeared on BloggingStocks on Wed, 18 Jul 2007 19:40:00 EST. Please see our terms for use of feeds.

• Home Depot Inc (NYSE: HD) -- increased share buyback by $22.5 billion, roughly one-third of its market capitalization
• Expedia Inc (NASDAQ: EXPE) -- buying back 42% of its outstanding stock through a Dutch auction
• National Semiconductor Corporation (NYSE: NSM) -- last week increased its buyback to $2.5 billion, or 27% of its market cap.

Buybacks signal bullishness originally appeared on BloggingStocks on Wed, 20 Jun 2007 13:36:00 EST. Please see our terms for use of feeds.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.

It seems that the competition that has been brewing between Apple Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT) has never really died down from the late 1970s, even as both companies have had ups and downs in the stock market and in the consumer products market as well. The battle between Apple and Microsoft has been (and will be) a perfect case study for future business textbooks at the best universities, as the fight between the two has been nothing short of amazing in the past 25 years or so.

Apple

Apple's start began with Steve Jobs (visionary guru) and buddy Steve Wozniak (tech guru) trying to find a way to get customers buying the personal computer before the market and world even knew what a personal computer was. Steve Jobs was trained in calligraphy and wanted the PC experience to be just as much an art and visceral, visible experience as a technical, computer program-interface experience. With that vision, and with a little help from friends, the two Steves started selling Apple's first PC products out of a garage about 27 years ago in the Southern California area, after Jobs dropped out of college due to lack of funds and general boredom.

What transpired throughout the early 1980s was the rapid growth of Apple Computer Inc. as the PC powerhouse at the same time it was grabbing the attention of MicroSoft (later renamed Microsoft Corp.) founder Bill Gates, who had dropped out of Harvard to pursue his vision of coming up with a PC operating system that he could "license" to all the big hardware manufacturers to use on their machines. But, Gates needed a nice interface to ensure his product was better than Apple's.

Continue reading Apple vs. Microsoft: Battle of the Brands

Apple vs. Microsoft: Battle of the Brands originally appeared on BloggingStocks on Mon, 09 Apr 2007 09:10:00 EST. Please see our terms for use of feeds.

• The company is planning to change its name to "Macy's Group," citing that close to 90% of company sales come from the Macy's Brand. Don't worry about those cute little brown bags, though; FD assures that the Bloomingdale's chain remains a valuable part of the company. Shareholders will vote on the change on May 18. If approved, it will take effect on June 1.
  
• FD will buy back up to 18% of its outstanding shares, or up to an additional $4 billion worth of stock.
  
• The firm declared a regular quarterly dividend of 12.75 cents per share, payable April 2, to shareholders of record at the close of business on March 15.
  

Federated Department Stores issues earnings report originally appeared on BloggingStocks on Tue, 27 Feb 2007 09:05:00 EST. Please see our terms for use of feeds.

Time Warner (NYSE:TWX) slightly exceeded the revenue expectations with $12.5 billion versus $12.49 billion estimates. Earnings per share were $0.43 after a $0.21 gain, so it posted $0.22 EPS; earnings estimates were $0.23 on a rounded up basis (FirstCall was $0.23 and Reuters was $0.22); StarMine (subscription required) was predicting $0.22 as of last week.

It has now used $16.4 billion for share buybacks to purchase a cumulative 912 million shares (over 30 days trading volume) and plans to complete its $20 Billion buyback plan in the first half of 2007.

Time Warner has also said that it expects 30% to 40% of OIBDA into free cash flows in 2007. It expects 2007 EPS of $1.00, including a $0.10 approximate gain on the sale of AOL access in Germany and excluding future merger and ongoing restructuring charges. The operating income is expected to run $7.362 billion, which will give an estimated $4.76 billion in free cash flow. Earnings expectations for 2007 are currently $0.99 to $1.01 from the various 'consensus' estimates.

Here is the full earnings release if you wish to peruse it for more detail.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.

Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.

Time Warner Earnings come in-line with most expectations originally appeared on BloggingStocks on Wed, 31 Jan 2007 08:31:00 EST. Please see our terms for use of feeds.

Stock outstanding shrinks by 3% in 2006 originally appeared on BloggingStocks on Wed, 03 Jan 2007 12:14:00 EST. Please see our terms for use of feeds.