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Stock buybacks, also known as share repurchase programs, have recently been a hot conversation topic in the market.
Many have criticized the practice, while others have pushed back against the critics.
In fact, buybacks totaled a whopping $930 billion in 2022.
There are several reasons companies elect to buy back their stock; they’ve decided to utilize excess cash, they want to limit dilution caused by employee stock option programs, or simply because they believe their shares are undervalued.
Nonetheless, some companies, including Chevron (CVX - Free Report) , Meta Platforms (META - Free Report) , and United Parcel Service (UPS - Free Report) , have unveiled sizable repurchase programs in 2023.
Below is a chart illustrating the year-to-date performance of all three stocks, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
With them scooping up so many shares, it raises a valid question – how do the companies currently stack up? Let’s take a closer look at the announcements and a few other aspects.
United Parcel Service
United Parcel Service is the world's largest express carrier and package delivery provider. The company unveiled a new $5 billion share repurchase program in its latest quarterly release back on January 31st.
The quarterly results delivered were mixed, with the company exceeding the Zacks Consensus EPS Estimate modestly but falling short of revenue expectations by 3%. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
In addition, UPS upped its quarterly dividend to $1.62 per share, payable on March 10th, 2023. Impressively, it represented the company’s 14th consecutive year of increased quarterly payouts.
Image Source: Zacks Investment Research
Chevron
Earlier in the year, Chevron unveiled a massive $75 billion share buyback program. And recently, in the company’s annual shareholder meeting, CVX raised its buyback guidance to $10 – $20 billion per year.
Pierre Breber, CFO, said, “We’re winning back investors with consistent and growing cash returned to shareholders across the commodity price cycle.”
The surge in energy prices has undoubtedly helped the company’s cash-generating abilities; CVX reported free cash flow of $8.6 billion in its latest release, growing nearly 30% year-over-year.
As we can see in the chart below, CVX’s free cash flow has recovered nicely from pandemic lows in June of 2020.
Image Source: Zacks Investment Research
Meta Platforms
The market was impressed with META’s latest quarterly report in early February, with the tech giant announcing a $40 billion share buyback program.
The company exceeded the Zacks Consensus EPS Estimate by more than 40% and posted revenue nearly 3% ahead of expectations. Shares soared following the release, as illustrated by the green arrow in the chart below.
Image Source: Zacks Investment Research
Following a challenging 2022, META shares aren’t nearly as expensive; the company’s shares presently trade at a 17.6X forward earnings multiple, well beneath the 23.4X five-year median and Zacks Computer and Technology sector average.
Image Source: Zacks Investment Research
And to top it off, Meta Platforms’ earnings outlook has drifted higher across all timeframes over the last several months, pushing the stock into a Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
Bottom Line
The primary focus surrounding the negativity of buybacks undoubtedly stems from comments said by president Joe Biden in his State of the Union address. So far, many have doubted the 1% buyback tax passed by congress just last year.
Still, while many have voiced concerns over buybacks, some companies, including Chevron (CVX - Free Report) , Meta Platforms (META - Free Report) , and United Parcel Service (UPS - Free Report) , have all unveiled sizable repurchase programs in 2023.
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Buyback Bonanza: 3 Companies Loading Up on Shares
Stock buybacks, also known as share repurchase programs, have recently been a hot conversation topic in the market.
Many have criticized the practice, while others have pushed back against the critics.
In fact, buybacks totaled a whopping $930 billion in 2022.
There are several reasons companies elect to buy back their stock; they’ve decided to utilize excess cash, they want to limit dilution caused by employee stock option programs, or simply because they believe their shares are undervalued.
Nonetheless, some companies, including Chevron (CVX - Free Report) , Meta Platforms (META - Free Report) , and United Parcel Service (UPS - Free Report) , have unveiled sizable repurchase programs in 2023.
Below is a chart illustrating the year-to-date performance of all three stocks, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
With them scooping up so many shares, it raises a valid question – how do the companies currently stack up? Let’s take a closer look at the announcements and a few other aspects.
United Parcel Service
United Parcel Service is the world's largest express carrier and package delivery provider. The company unveiled a new $5 billion share repurchase program in its latest quarterly release back on January 31st.
The quarterly results delivered were mixed, with the company exceeding the Zacks Consensus EPS Estimate modestly but falling short of revenue expectations by 3%. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
In addition, UPS upped its quarterly dividend to $1.62 per share, payable on March 10th, 2023. Impressively, it represented the company’s 14th consecutive year of increased quarterly payouts.
Image Source: Zacks Investment Research
Chevron
Earlier in the year, Chevron unveiled a massive $75 billion share buyback program. And recently, in the company’s annual shareholder meeting, CVX raised its buyback guidance to $10 – $20 billion per year.
Pierre Breber, CFO, said, “We’re winning back investors with consistent and growing cash returned to shareholders across the commodity price cycle.”
The surge in energy prices has undoubtedly helped the company’s cash-generating abilities; CVX reported free cash flow of $8.6 billion in its latest release, growing nearly 30% year-over-year.
As we can see in the chart below, CVX’s free cash flow has recovered nicely from pandemic lows in June of 2020.
Image Source: Zacks Investment Research
Meta Platforms
The market was impressed with META’s latest quarterly report in early February, with the tech giant announcing a $40 billion share buyback program.
The company exceeded the Zacks Consensus EPS Estimate by more than 40% and posted revenue nearly 3% ahead of expectations. Shares soared following the release, as illustrated by the green arrow in the chart below.
Image Source: Zacks Investment Research
Following a challenging 2022, META shares aren’t nearly as expensive; the company’s shares presently trade at a 17.6X forward earnings multiple, well beneath the 23.4X five-year median and Zacks Computer and Technology sector average.
Image Source: Zacks Investment Research
And to top it off, Meta Platforms’ earnings outlook has drifted higher across all timeframes over the last several months, pushing the stock into a Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
Bottom Line
The primary focus surrounding the negativity of buybacks undoubtedly stems from comments said by president Joe Biden in his State of the Union address. So far, many have doubted the 1% buyback tax passed by congress just last year.
Still, while many have voiced concerns over buybacks, some companies, including Chevron (CVX - Free Report) , Meta Platforms (META - Free Report) , and United Parcel Service (UPS - Free Report) , have all unveiled sizable repurchase programs in 2023.