(FROM THE WALL STREET JOURNAL 4/7/15)
22: Number of S&P 500 companies whose per-share profit
growth last year stemmed solely from share repurchases
Stock-buyback programs can provide the smoke and mirror for
earnings growth.
Of companies in the S&P 500 index, 22 that reported lower
profits still posted flat or positive earnings per share because
they sopped up some of their outstanding stock, according to a Wall
Street Journal review of their most recent fiscal years provided by
S&P Capital IQ.
That is down from 29 companies the year before, in part because
last year's 11% increase in stock prices made buybacks
progressively more expensive.
International Business Machines Corp. was one of the biggest
names to juice its EPS. The company's net income from continuing
operations fell almost 7%, but EPS grew nearly 2% because it
reduced its share count by 8% last year. It was the second year in
a row that buybacks helped IBM deliver per-share earnings growth
despite sagging profits.
An IBM spokesman didn't have any immediate comment.
Others that turned lower earnings into higher EPS included
Caterpillar Inc., Exxon Mobil Corp. and UnitedHealth Group Inc.
Companies buy back stock for many reasons, such as to offset
dilution from stock-based executive pay, or when management feels
Wall Street is significantly undervaluing the business.
Increasingly, companies are using repurchases to appease activist
investors who demand they return excess cash.
Last year, 308 companies in the index ended the year with fewer
shares compared with 282 the year before.
They spent $553 billion on buybacks in 2014, the most in a
calendar year since the $589 billion record set in 2007.
Access Investor Kit for Caterpillar, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1491231015
Access Investor Kit for Exxon Mobil Corporation
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US30231G1022
Access Investor Kit for International Business Machines
Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4592001014
Access Investor Kit for UnitedHealth Group, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US91324P1021
Subscribe to WSJ: http://online.wsj.com?mod=djnwires