Buyback Wednesdays – Alphabet Announces A Massive $70 Billion Stock Buyback

Google’s parent Alphabet (GOOG) announced a massive $70 billion stock buyback after reporting Q1 2022 results yesterday. Unfortunately those results did not give the market a lot of confidence as they came in below consensus analyst estimates driven in part by a slowdown in ad revenue at YouTube and a $1.07 billion loss on investments (equity securities). This overshadowed a 23% increase in revenue to $68 billion and a 22% increase in operating income to $20 billion. The stock, which was already down 3% in a weak market yesterday, is down another 3% today.

Alphabet is second only to Apple (AAPL) in announcing large buybacks and then following through on those announcements. This $70 billion announcement eclipses the $50 billion buyback they announced last April. Facebook’s parent Meta Platforms (FB) also announced a $50 billion buyback last October when the stock was trading at $328.69. It will be interesting to see if they increase their buyback allocation when they announce results after the market closes today.

While these stock buybacks are large in absolute dollar terms, considering the large market caps of these companies, they don’t often end up retiring a significant portion of their shares outstanding. Their shares outstanding are also constantly impacted by high stock-based compensation. The buyback announcement by Google represented 4.43% of its $1.58 trillion market cap at announcement.

It was interesting to see that two of the five top buybacks during the last week were from regional banks. We have been seeing a lot of M&A activity, insider purchases and buybacks among regional banks. They benefited from the PPP loans and are probably going to do well in a high interest rate environment as long as they don’t have sizable exposure to mortgage origination, derive a lot of income from asset management or generate revenue from trading activities.

Northeast Bank (NBN) announced a buyback representing nearly 14% of its market cap at announcement. This Portland, Maine based regional bank has $1.57 billion in assets and trades at 1.19 times tangible book value. In contrast, Regionals Financial (RF), which announced a 12% buyback, has $164 billion in assets and trades at 2.11 tangible book.

Welcome to edition 4 of Buyback Wednesdays, a new weekly series of articles we launched on Inside Arbitrage a few weeks back to track the top stock buyback announcements during the prior week. The companies in the list below are the ones that announced the largest buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low volume small-cap stocks with a market cap below $2 billion.

Top 5 Stock Buyback Announcements

1. Cango Inc. (CANG): $2.86

On April 22, 2022, the Board of Directors of this Chinese automotive transaction service platform approved a new share repurchase program authorizing the company to repurchase up to $50 million of its class A common stock equal to nearly 14.5% of the common shares of the company. 

Market Cap: $360.10M Avg. Daily Volume (30 days): 382,366 Revenue (TTM): $617.11M
Net Income Margin (TTM): -0.22% ROE (TTM): -0.11%  Net Cash: $319.37M
P/E: N/A Forward P/E: N/A EV/EBIDTA (TTM): 5.71

2. Northeast Bank (NBN): $36.32

On April 21, 2022, the Board of Directors of this regional bank approved a new share repurchase program authorizing the company to repurchase up to $40 million of its class A common stock equal to nearly 13.7% of the common shares of the company. 

Market Cap: $318.40M Avg. Daily Volume (30 days): 40,575 Revenue (TTM): $153M
Net Income Margin (TTM): 50.2% ROE (TTM): 36.47%  Net Cash: $146M
P/E: 3.9 Forward P/E: N/A Price/Tang. Book: 1.19

3. West Fraser Timber Co. Ltd. (WFG): $85.97

On April 20, 2022, the Board of Directors of  the wood products company approved a new share repurchase program authorizing the company to repurchase up to $1.25 billion of its class A common stock equal to 13.6% of the common shares of the company. 

 Market Cap: $8.79B  Avg. Daily Volume (30 days): 372,807  Revenue (TTM): $10.52B
 Net Income Margin (TTM): 28.02%  ROE (TTM): 58.16%  Net Cash: $1.04B
 P/E: 3.23  Forward P/E: 3.95  EV/EBIDTA (TTM): 1.75

4. Altra Industrial Motion Corp. (AIMC): $34.19

On April 26, 2022, the Board of Directors of this industrial machinery manufacturer approved a new share repurchase program authorizing the company to repurchase up to $300 million of its class A common stock equal to nearly 13.5% of the common shares of the company. 

Market Cap: $2.30B Avg. Daily Volume (30 days): 310,869 Revenue (TTM): $1.9B
Net Income Margin (TTM): 1.46% ROE (TTM): 1.39%  Net Debt: $1.42B
P/E: 84.86 Forward P/E: 9.9 EV/EBIDTA (TTM): 9.63

5. Regions Financial Corporation (RF): $21.02

On April 20, 2022, the Board of Directors of this financial holding company approved a new share repurchase program authorizing the company to repurchase up to $2.5 billion of its class A common stock equal to nearly 12.1% of the common shares of the company. 

Market Cap: $20.24B Avg. Daily Volume (30 days): 9,222,974 Revenue (TTM): $6.84B
Net Income Margin (TTM): 35.46% ROE (TTM): 13.93%  Net Cash: $27.27B
P/E: 8.87 Forward P/E: 10.13 Price/Tang. Book: 2.11

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