Stock buybacks, also known as share repurchase programs, are commonly implemented by companies to boost shareholder value.
A stock buyback occurs when a company purchases outstanding shares of its stock, essentially re-investing in itself.
There are several reasons companies elect to buy back their stock; companies have decided to utilize excess cash, want to limit dilution caused by employee stock option programs, or simply because they believe their shares are undervalued.
Three companies – Kellogg Company K, Waste Management WM, and Raytheon Technologies RTX – have all recently unveiled repurchase programs.
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
In addition to boosting shareholder value, all three companies have seen their shares widely outperform the S&P 500 year-to-date. Let’s take a closer look at each one.
Raytheon Technologies
Raytheon Technologies provides advanced systems and services worldwide for commercial, military, and government customers. Just recently, the company authorized a $6 billion share buyback program.
RTX sports a favorable growth profile; earnings are forecasted to climb more than 11% in its current fiscal year (FY22) and a further 9.3% in FY23.
The projected earnings growth comes on top of forecasted Y/Y revenue upticks of 4.3% in FY22 and 8% in FY23.
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In addition, for those with an appetite for income, RTX has that covered; the company’s annual dividend currently yields a solid 2.2%, well above its Zacks Aerospace sector average.
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Waste Management
Waste Management is a leading provider of comprehensive waste management services in North America. Earlier in December, the company’s board approved a $1.5 billion share buyback program.
Waste Management has consistently posted better-than-expected quarterly results as of late, exceeding earnings and revenue estimates in four consecutive quarters.
In its latest release, WM exceeded the Zacks Consensus EPS Estimate by 4% and posted a marginal revenue surprise. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Further, WM rewards its shareholders via its annual dividend, currently yielding a respectable 1.6%. Impressively, the company has upped its payout five times over the last five years, translating to an 8.2% five-year annualized growth rate.
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Kellogg’s
Kellogg’s manufactures and markets ready-to-eat convenience foods, carrying a balanced portfolio of cereal and snack products. In early December, the company unveiled that its board approved a new $1.5 billion share repurchase program.
Like WM, Kellogg’s has been on an impressive earnings streak, exceeding earnings and revenue estimates in eight consecutive quarters. In its latest release, the food titan registered a 4.1% bottom line beat paired with a 4.5% sales surprise.
Image Source: Zacks Investment Research
It’s impossible to ignore K’s dividend metrics; the company’s annual dividend currently yields a sizable 3.3%, well above its Zacks Consumer Staples sector average. K has grown its payout by roughly 1.6% over the last five years.
Image Source: Zacks Investment Research
Bottom Line
A common way that companies boost shareholder value is through implementing share buybacks. In its simplest form, buybacks represent a company essentially re-investing in itself.
In addition, it can provide a nice confidence boost for investors, as the buybacks indicate that the company is utilizing its excess cash and not just hoarding it.
And in the face of a challenging economic backdrop in 2022, companies willing to dish out extra cash can be hard to find.
All three stocks above – Kellogg Company K, Waste Management WM, and Raytheon Technologies RTX – have recently unveiled repurchase programs, attempting to maximize shareholder value.
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Waste Management, Inc. (WM) : Free Stock Analysis Report
Kellogg Company (K) : Free Stock Analysis Report
Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report
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