Thursday, March 21, 2019
Tech Data’s Goodwill Adjustment

Tuesday, March 19, 2019
There’s Taxes, and There’s Taxes

Saturday, March 16, 2019
Adventures in Tax Cuts and Net Income

Monday, March 11, 2019
Big Moves in Goodwill, Intangible Value

Friday, March 8, 2019
CVS, Goodwill, and Enterprise Value

Thursday, February 28, 2019
Summary of Our Goodwill Research/ How-To

Wednesday, February 27, 2019
What Does ‘Other’ Mean? An Example

Thursday, February 21, 2019
Another Tale, Buried in the Footnotes

Wednesday, February 13, 2019
Low Latency Calcbench

Monday, February 11, 2019
Now Streaming on Hulu: Red Ink

Thursday, February 7, 2019
Early Look at 2018 Tax Decline

Wednesday, February 6, 2019
You Revised WHAT, Netflix?

Thursday, January 31, 2019
Talking About Huawei Exposure

Wednesday, January 30, 2019
Another Discrepancy in Reported Numbers

Wednesday, January 30, 2019
Finding Revised Facts: Hertz Edition

Wednesday, January 23, 2019
GE Commercial Aviation Services: Bringing Numbers to Light

Monday, January 21, 2019
Differences in Earnings Releases and 10-Ks

Wednesday, January 16, 2019
The Importance of Textual Analysis

Tuesday, January 8, 2019
A Look at Climate Change Disclosures

Wednesday, January 2, 2019
Quants: Point-in-Time Data for Backtesting

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We tend to be cynical people here at Calcbench, so one issue we will watch closely in 2018 is the amount of money companies spend repurchasing shares.

After all, one promise made last year during negotiations over tax reform was that if Uncle Sam did cut corporate tax rates and flood company coffers with cash, the money would go to hiring more people, buying new equipment, investing in more R&D — not on repurchasing shares, which foremost rewards insiders loaded up on equity-based compensation.

Well, tax reform became law. So how will companies use all that extra cash, now that they actually have it?

So far in 2018, we have only anecdotal evidence of how companies will spend the money. Some have given bonuses (Apple, Comcast, Disney, Waste Management, Southwest). Others have handed out raises (Walmart, Starbucks, JP Morgan, Wells Fargo). And a few have indeed said they will spend it on share repurchase programs: Anthem, for example, announced that it would devote half of its tax reform surplus to buybacks.

We can, however, start to get a good glimpse of how much money Corporate America spent on share buybacks in 2017.

As of Feb. 21, 335 of the S&P 500 have filed annual reports for 2017. That group spent $246.9 billion on repurchase of common shares in 2017 — less than they spent in 2016 or 2015, although the average amount spent per filer did increase. (In other words, some filers within the group cut back on share repurchase spending sharply, pushing the total down but the average per filer up.)

Broadly speaking, one would expect companies to spend less on share repurchase programs in times of rising stock markets, such as the market in most of 2017. As the market rises, shares become more expensive. Companies will either buy fewer shares for the same amount of money (because the price per share is rising); or they might suspend share programs until the price falls.

That said, drawing general conclusions about share buybacks is risky. Some sectors might be booming, prompting companies to retreat from buying expensive stock; while others are languishing, prompting confident CEOs to scoop up more stock while it’s cheap. Buybacks happen most often when a company believes its shares are undervalued. They also happen when the company isn’t sure how else to invest the money.

A safer analysis is to analyze those companies that you want to follow specifically. Look at the money they’re spending on buybacks, and what they disclose in the footnotes and earnings releases about why they are buying back stock.

As always, Calcbench subscribers can do that using our Interactive Disclosure tool and by setting email alerts to let you know when a new filing has arrived. And here at central command, we also track share repurchases and report overall activity every few months; be sure to visit our Research Page for older reports, and new ones will always be mentioned here.

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