Buyback Wednesdays – Cumulus Media Announces Buyback After Rejecting An Unsolicited Bid

A combination of earnings season and a weak market supercharged stock buyback announcements with 32 companies announcing buybacks since our last article. I came across the following Tweet this morning and was reminded that when management teams allocate capital well including knowing when to repurchase stock and when to issue it, long-term investors benefit.

AZO Buyback Tweet

Cumulus Media (CMLS), the radio stations operator with 406 owned or operated radio stations and a reach of nearly a quarter billion people, recently rejected a $15 to $17 unsolicited non-binding bid from U.S. radio veteran Jeff Warshaw. The deal would have valued the company at about $1.2 billion including debt. When I first saw this buyback announcement come through, I was a little surprised because Cumulus has a significant amount of net debt ($761 million) on its balance sheet and a market cap of just $280.61 million. The company had not bought back any stock over the last three years even as it traded below $5 per share for several months in 2020 and the stock is yet to recover to pre-pandemic levels. The board decided to reject this unsolicited bid and in the context of this rejection, the buyback starts to make sense. Despite the rejection by the board last week and weak market conditions, the stock has not given back the nearly 40% gain triggered by this takeover offer, implying that shareholders expect a revised higher bid.

Cumulus YTD Price Chart

Cumulus YTD Price Chart

Cumulus recently reported Q1 2022 results with revenue increasing 15% to $232 million and a narrower than expected loss of 4 cents per share. For the full year 2022, the company is expected to earn $2.05 per share and $2.63 per share in 2023, giving it a forward PE of 7. The company emerged out of chapter 11 bankruptcy in July 2018 and has been paying down debt in recent years.

Welcome to edition 6 of Buyback Wednesdays, a weekly series that tracks 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. Cumulus Media Inc. (CMLS): $14.53

On May 4, 2022, the Board of Directors of this audio-first media and entertainment company, approved a new share repurchase program authorizing the company to repurchase up to $50 million of its class A common stock equal to nearly 17% of the common shares of the company. 

Market Cap: $280.61M Avg. Daily Volume (30 days): 297,459 Revenue (TTM): $946.77M
Net Income Margin (TTM): 4.04% ROE (TTM): 9.63%  Net Debt: $761M
P/E: 18.6 Forward P/E: 7.35 EV/EBIDTA (TTM): 7.49

2. Gibraltar Industries, Inc. (ROCK) : $38.47

On May 4, 2022, the Board of Directors of this manufacturer of building products, approved a new share repurchase program authorizing the company to repurchase up to $200 million of its class A common stock equal to nearly 14% of the common shares of the company. 

Market Cap: $1.37B Avg. Daily Volume (30 days): 205,995 Revenue (TTM): $1.37B
Net Income Margin (TTM): 5.72% ROE (TTM): 9.95%  Net Debt: $36.17M
P/E: 17.79 Forward P/E: 13.26 EV/EBIDTA (TTM): 9.37

3. CECO Environmental Corp. (CECE) : $5.36

On May 4, 2022, the Board of Directors of this air quality and fluid handling systems provider, approved a new share repurchase program authorizing the company to repurchase up to $20 million of its class A common stock equal to nearly 12% of the common shares of the company. 

Market Cap: $148.95M Avg. Daily Volume  (30 days): 132,996 Revenue (TTM): $324.14M
Net Income Margin (TTM): 0.44% ROE (TTM): 0.97%  Net Debt: $50.44M
P/E: 107 Forward P/E: 9.41 EV/EBIDTA (TTM): 8.07

4. AdaptHealth Corp. (AHCO) : $14.86

On May 10, 2022, the Board of Directors of this healthcare equipment provider, approved a new share repurchase program authorizing the company to repurchase up to $200 million of its class A common stock equal to nearly 10.2% of the common shares of the company. 

Market Cap: $1.53B Avg. Daily Volume (30 days): 950,442 Revenue (TTM): $2.47B
Net Income Margin (TTM): 6.34% ROE (TTM): 13.47%  Net Debt: $2.22B
P/E: 19.34 Forward P/E: 12.22 EV/EBIDTA (TTM): 6.26

5. Hilton Grand Vacations Inc. (HGV): $44.57

On May 9, 2022, the Board of Directors of this global timeshare company approved a new share repurchase program, authorizing the company to repurchase up to $500 million of its class A common stock equal to nearly 10% of the common shares of the company. 

Market Cap: $4.99B Avg. Daily Volume (30 days): 735,247 Revenue (TTM): $2.13B
Net Income Margin (TTM): 8.74% ROE (TTM): 19.23%  Net Debt $3.89B
P/E: 24.97 Forward P/E: 11.14 EV/EBIDTA (TTM): 10.76

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