Wednesday, May 2, 2018

You may have seen Apple’s latest earnings release this week, confirming two ideas we have long suspected here.

First, Apple continues to have more free cash than us. Second, it will spend those haystacks of cash to buy back even more Apple stock.

The numbers in the earnings release were good: quarterly revenue of $61.1 billion, up 16 percent from one year ago; operating income at $15.9 billion, up 12.7 percent. Lots of rosy talk about iPhone X sales, numbers ahead of Wall Street expectations, everyone happy. We get it.

Then came this gem: Apple will also buy back up to $100 billion in shares.

Share repurchase programs are in the news lately because so many companies are announcing more of them. More than a few people say that’s a consequence of last year’s tax reform act, which sharply cut corporate tax rates. Companies have more cash than they know how to spend — don’t forget our post earlier this year about the S&P 500 creating cash like gangbusters last year — so they returning that extra money to shareholders by repurchasing shares and therefore driving up the price.

Apple just takes that trend to a whole new level.

Calcbench tries to publish annual reviews of share repurchase programs, and Apple routinely places at the top of our lists. For example, in our prior report from June 2017, we calculated that on average, Apple spent $107.3 million every day buying back stock for the prior 21 quarters.

Now, that is only an average; there were plenty of days, and even a few quarters, where Apple didn’t repurchase any stock at all. But over the long arc of the 2010s, Apple has been one of the biggest share repurchasers on Wall Street. Apple has also been a prime mover in the world of “mega-buybacks,” where a company spends at least $1 billion buying back stock within one quarter.

We visited our Company-in-Detail page to look up Apple’s repurchases for the last five years. The total is $168 billion, and the year-by-year breakdown looks like this:

All those expenditures come from an earlier repurchase program Apple’s board approved in 2012 for $200 billion. Now, as that program reaches its late stages and Apple still has mountains of cash, it has authorized this new program for another $100 billion.

Something to think about as you install that new iOS update.

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