4. Discovering Major Buybacks
Discover Financial Services (NYSE: DFS) beat earnings on a slight miss on revenues, but the loan growth was up 9% while credit card loans were up 10% after a 9% sales volume increase, handily outpacing the total net charge-off rate increasing 40 basis points from the prior year to 3.11%. The company spent $555 million on buybacks in the second quarter alone, and about a week before the results the credit card issuer confirmed a stock buyback increase to $3 billion under the previously approved Federal Reserve stress test (CCAR) capital allocation plan. This is rather strong for a financial stock with a market cap of just $25 billion.
The approved repurchases allow for up to $1.85 billion during the four quarters ending June 30, 2019. With shares recently trading near $73, they have a 52-week range of $57.50 to $81.93, and the consensus target price is $85.83.
5. Merger Ashes Creating Big Buybacks
When two companies fail to close a merger, they have to do something worthwhile to keep shareholders from revolting. That was the case in July with Qualcomm Inc. (NASDAQ: QCOM) and NXP Semiconductor N.V. (NASDAQ: NXPI) after the companies finally had to call off their prior merger plans.
Qualcomm threw in the towel on acquiring NXP and said that it will accelerate its share buybacks. The chip giant will aim to repurchase up to $10 billion under its $30 billion total buyback plan in the next month alone. That $30 billion is expected to be concluded by the end of its 2019 year. Qualcomm even set a Dutch tender auction price range of $60.00 to $67.50 per share. Its current share price of $65.75 comes with a market cap of $96 billion.
6. Payment Transactions Leading to Buybacks (and Acquisitions)
PayPal Holdings Inc. (NASDAQ: PYPL) is now free from eBay, and the payments company plans to grow organically and via acquisitions, while also looking to return capital to shareholders at the same time. The payments giant announced a new $10 billion buyback plan that will go into effect upon the completion of the $2.7 billion remaining under the current buyback plan.
PayPal still sees its capital base and cash flow strong enough to allow for bolt-on acquisitions while returning 40% to 50% of free cash flow to investors over the coming three to five years. PayPal was last seen trading closer to $86, which is lower than its peak from before earnings in late July. PayPal’s market cap was last seen at $101 billion.
7. Big Oil’s Return to Big Stock Buybacks, From Overseas
Royal Dutch Shell PLC (NYSE: RDS-A) may not be U.S.-based, but it has extensive U.S. operations, and the company announced an extensive $25 billion share buyback plan along with what some investors took as cautious earnings results. The buyback may have some oil price limitations to it, but Royal Dutch Shell already has been issuing press releases stating that it has started buying back shares.
Its American depositary shares were up just above $70 prior to earnings on July 25, and those shares were trading at $66 more recently. The oil and gas giant has a market cap of roughly $300 billion, and its 52-week trading range is $54.27 to $73.86. Its consensus analyst target price now is closer to $81.
8. Value in Tech Allows for Extra Capital Deployment
Western Digital Corp. (NASDAQ: WDC) recently was screened as a key value stock looking dirt cheap against the market, and its shares have slid due to growth and market concerns. The company has proven (and then some) that it can send back cash to its shareholders. On top of beating earnings expectations in July, the company said that it is replacing its prior buyback plan with a new $5 billion share buyback plan.
Western Digital went so far as to formally note that this buyback reflects ongoing business fundamentals and cash flow generation capabilities. Its shares were trading at $77 ahead of earnings, and the stock was trading closer to $68 on last look. Western Digital has a market cap of $20 billion, so a $5 billion allowance to buy back shares might raise some eyebrows.