Q1 Buybacks Slightly Up, But Fewer Shares Repurchased
Breakdown shows a broader participation in share count reduction – but it is slow
Q1,’13 S&P 500 buyback expenditures slightly increased 0.8%, to $100.0B from $99.1B in Q4,’12, and was up 18.6% for Q1,’12 $84.3B (record was Q2,’07 at $172B).
12 months ending Mar,’13 increased 3.8% to $414.6B from the $399.5B posted in the prior 12 month period (12 month high was 2007, at $589.1B)
Companies continued to protect their earnings from dilution due to option execution, however, actual shares repurchased were down, as the 0.8% increase in expenditures failed to keep pace with the 6.8% increase in the average share price for the quarter.
Even with programs and authorizations setting record levels and receiving extensive press coverage, the number of companies moving back to share count reduction is slow, but they are increasing, with 81 issues reducing their share count by at least 1% in Q1 (over Q4,’12), a general measure of share count reduction, as compared to just 36 issues for Q4 2012 (over Q3,’12). In Q1, 328 issues reported share repurchases, up from 317 in Q4, with 212 of them reducing their share count, up from 98 in Q4.
While buybacks remain the instrument of choice to prevent earnings dilution from employee options and dividend reinvestment plans, the first quarter appeared to fall short of the needed shares. Overall shares have slightly increased, as issuance has outpaced repurchases. In the first quarter the overall share count was up, with the Information Technology sector, the leader in buybacks, slightly increasing its overall share count by 0.9%. The Telecommunications Sector, led by AT&T, which has reduced its share count by 6.9% over the last four quarters, reduced its overall share count by 3.5%.
The Information Technology Sector held its position as the largest repurchaser, spending $17.5B, which was down from the $22.7B spent in Q4.
The Health Care Sector was right behind IT, as it increased to $16.8B from $11.4B, with Telecommunications increasing from $4.4B in Q4,’12 to $6.5B in Q1.
AT&T led with a $5.9B expenditure (up from $4.4B), followed by Exxon Mobil ($5.6B), Pfizer ($4.6B), IBM ($2.6B), and JP Morgan ($2.6B).
Given all of the talk and authorizations, there is great expectation for the second quarter, especially from Apple, which announced a record authorization.
Share prices for Q2,’13 are running 6.3% higher than Q1,’13 and 19.3% higher than Q2,’12. This means that companies will need to spend more just to buy back the same number of shares, and spend additional funds if they wish to create share count reduction. They talked the talk, now we’ll see if they walk the walk.
(FYI – cash has again set a new record, be it by 0.17% gain)