Stock Buybacks This Week (TROW, TECD, TRI, CTS)

This week was pretty light in the week of share repurchase announcements, and most of these were mere add-on buybacks to existing plans.  Here are some of the plan additions announced this week:

  • T. Rowe Price (NASDAQ: TROW) added 15 million shares of stock to its existing buyback plan, close to 6% of its outstanding stock.
  • Tech Data (NASDAQ: TECD) announced $100 million for share buybacks, in addition to its existing plan.  Its market cap is almost $2 Billion, so about 5% of its outstanding stock.
  • One interesting buyback came from Thomson Reuters (NYSE: TRI), which added $500 million to its buybacks.  While this is technically an add-on plan, it is after the Reuters and Thomson merger.
  • A small announcement came from CTS Corp. (NYSE: CTS), which announced it would repurchase up to 1 million shares of common stock.  That is only about $11 million in today’s dollars and its market cap is $365 million.

It seems that share buybacks are getting less and less on the new buyback plans, but that may be dual-imposed function.  The first and obvious cause for the lack of new share buybacks is that this was the most in-vogue announcement that a company could make in 2006 and 2007 with each year seeing massive amounts of cash used to return stock and return capital to shareholders.  The more pressing issue however may be the obvious in that companies may realize they need to start hording cash for what lies ahead.

Some traders prefer share buybacks and some do not.  To they make plenty of sense if the buyback is used as a stabilizing factor in volatile times.  But when companies keep buying back stock if there shares are under no pressure we frequently think they are trying to juice their internal EPS growth or that they can’t find many good alternatives for growth.  Obviously that isn’t always the case.

Jon C. Ogg
June 6, 2008