Buyback Wednesdays – Home Depot Plans $15 Billion Buyback

Buyback activity slowed down last week with only 12 companies announcing buybacks. The company that topped our list with a 17% buyback was Winnebago Industries (WGO), manufacturer and seller of recreational vehicles. WGO announced a $350 million share repurchase on August 17, 2022. Elevated gas prices combined with a weakening housing market is likely to have a negative impact on RV sales in the near future. The stock is undeniably cheap with an EV/EBITDA below 4, which is probably the reason the company is planning on buying back shares. Interestingly, Thor Industries (THO), the giant RV manufacturer also announced an additional buyback of $450 million in June this year, representing around 10.5% of its market cap. We wrote about Thor in our Buyback Wednesdays post a couple of months ago.

General Motors (GM) also announced a $1.7 billion additional buyback representing around 3% of its market cap at announcement.

The other significant buyback of the week was by Home Depot (HD). Home Depot announced a huge buyback of $15 billion representing around 4.5% of its market cap at announcement. This replaces the previous $20 billion repurchase authorization announced by the company in May, 2021. The company has repurchased nearly 11% of its shares since 2018. Home Depot acquired its old subsidiary, HD Supply Holdings in 2020 and we had wrote about it in our Merger Arbitrage Mondays post titled Merger Arbitrage Mondays – Home Depot Brings HD Supply Holdings Back Into The Fold.

When announcing Q2, 2022 results on August 16, 2022, the company’s new CEO and President Ted Decker stated,

“In the second quarter, we delivered the highest quarterly sales and earnings in our company’s history,”

Sales for the second quarter were $43.8 billion, up 6.5% from the same period last year. Diluted earnings per share were $5.05 in the second quarter up 11.5% from $4.53 in Q2, 2021. Earnings per share are expected to grow to $16.6 in 2023 and $17.4 in 2024, giving the company a forward P/E of 18.8. Annual revenue is also estimated to increase considerably in the coming years, which is interesting considering recent weakness in housing.

HD’s current net profit margin of 10.9% is higher than last year’s 10.6% margin. HD has better net income margins compared to its peers like Lowe’s Companies (LOW) and Floor & Decor Holdings (FND). Earnings have also grown by 14.2% per year over the past 5 years. The company has sizable net debt of $46 billion but its debt is well covered by free cash flow, which was $14 billion last fiscal year.

Welcome to edition 21 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. Winnebago Industries, Inc. (WGO): $63.73

On August 17, 2022, the Board of Directors of this manufacturer and seller of recreation vehicles approved a new share repurchase program authorizing the company to repurchase up to $350 million of its class A common stock equal to nearly 17.2% of its market cap at announcement.

Market Cap: $2.02B Avg. Daily Volume (30 days): 633,383 Revenue (TTM): $4.81B
Net Income Margin (TTM): 8.14% ROE (TTM): 34.48%  Net Debt: $344.58M
P/E: 5.52 Forward P/E: 6.67 EV/EBIDTA (TTM): 3.77

2. FinVolution Group (FINV): $4.7

On August 22, 2022, the Board of Directors of this fintech platform approved an additional share repurchase program authorizing the company to repurchase up to $80 million of its class A common stock equal to nearly 6.3% of its market cap at announcement.

Market Cap: $1.27B Avg. Daily Volume (30 days): 404,350 Revenue (TTM): $1.56B
Net Income Margin (TTM): 24.84% ROE (TTM): 24.9%  Net Cash: $990.77M
P/E: 3.68 Forward P/E: 3.86 EV/EBIDTA (TTM): 0.66

3.  Old Republic International Corporation (ORI): $24.24

On August 19, 2022, the Board of Directors of this insurance company approved a new share repurchase program authorizing the company to repurchase up to $450 million of its class A common stock, representing nearly 5.9% of its market cap at announcement.

Market Cap: $7.28B Avg. Daily Volume (30 days): 1,504,373 Revenue (TTM): $8.75B
Net Income Margin (TTM): 11.22% ROE (TTM): 14.91%  Net Debt: $1.49B
P/E: 7.53 Forward P/E: N/A EV/EBIDTA (TTM): 6.66

4. QuidelOrtho Corporation (QDEL): $84.48

On August 17, 2022, the Board of Directors of this health care equipment 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 5.2% of its market cap at announcement.

Market Cap: $5.74B Avg. Daily Volume (30 days): 799,827 Revenue (TTM): $2.76B
Net Income Margin (TTM): 36.43% ROE (TTM): 31.79%  Net Debt: $2.5B
P/E: 3.85 Forward P/E: 6.86 EV/EBIDTA (TTM): 5.33

5. FinWise Bancorp (FINW): $10.95

On August 18, 2022, the Board of Directors of this bank approved a new share repurchase program authorizing the company to repurchase up to $6.9 million of its class A common stock, equal to nearly 5% of its market cap at announcement.

Market Cap: $141.48M Avg. Daily Volume (30 days): 18,101 Revenue (TTM): $80.46M
Net Income Margin (TTM): 41.6% ROE (TTM): 40.31%  Net Cash: $88.76M
P/E: 4.36 Forward P/E: N/A Price/Tangible Book: 1.06

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