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Buyback activity slowed down last week with 28 companies announcing stock buybacks compared to 42 in the prior week. This week saw some huge buybacks announced by well-known giants. The $20 billion buyback announced by Walmart (WMT), representing around 5.3% of its market cap at announcement was the highest in dollars terms. The other significant announcements that failed to make it to the top 5 were the $4 billion buyback by Thermo Fisher Scientific (TMO) and the $1.5 billion buyback by Steel Dynamics (STLD), which represent around 2% and 9% of their market caps at announcement respectively.
It is interesting to note that both the leading hospitality brands announced stock buybacks this week. Marriott International (MAR) approved an additional repurchase of 25 million shares while Hilton Worldwide Holdings (HLT) announced a $2.5 billion additional share repurchase plan.
Marriott International (MAR) $161.77
Marriott operates 30 brands and 8,000+ properties across 139 countries and territories. The company is returning value to shareholders through both share repurchases and dividends. The company had suspended its 48 cents per share quarterly dividend during the pandemic and resumed payments again this year. It started the year with a 30 cents per share quarterly dividend and this quarter bumped it up to 40 cents a quarter. Marriott has bought back around 8% of its shares outstanding since 2018. The stock has bucked the general market trend and is up almost 4% over the last year.
After witnessing a significant drop during the pandemic, Marriott’s stock is now above pre-pandemic levels. While trailing twelve months revenue of $5 billion hasn’t reached pre-crisis levels, Marriott is more profitable than before the pandemic. Its gross profit margin of 79% and net income margin of 43.72% are the highest in two decades. Year-over-year revenue growth of 72.75% is high compared to Hilton’s (HLT) 67.53% and Airbnb’s (ABNB) 50.97%, although Airbnb’s forward revenue growth of 40.50% surpasses both Marriott and Hilton. Some of this growth is a bounce back from pandemic suppressed demand and is unlikely to continue at the same pace.
Before the pandemic, business travel accounted for around 60% and leisure accounted for about 40% of Marriott’s revenue. However, post-pandemic, the company has seen a flip between its share of business and leisure travel. The booking volume for corporate travel has started picking up momentum and price hikes could boost corporate travel revenue by high single digits year over year. Marriott recently announced its expansion into apartment-style accommodations with the launch of apartments by Marriott Bonvoy.
“Travelers planning vacations and long business trips today are seeking more choice in accommodations, and the introduction of Apartments by Marriott Bonvoy responds to those trends while offering developers a premium product backed by our trusted name and distribution platform,” said Stephanie Linnartz, President, Marriott International.
This concept is similar to Airbnb in terms of offering spacious longer-term accommodations. I wrote about Airbnb, Marriott and Hilton in an article titled Airbnb: Worth More Than Marriott, Hilton And Hyatt Combined last November.
Marriott recently reported strong Q3 2022 results. Q3 2022 adjusted diluted EPS was $1.69, compared to Q3 2021 adjusted diluted EPS of $0.99. The company beat earnings estimates in each of the last nine quarters. The company had 11 upward EPS revisions from analysts during the last 90 days. Q3 adjusted EBITDA exceeded the same quarter in 2019 by 9%. Year-to-date, net cash provided by operating activities was $1.9 billion, a significant increase of nearly $1.2 billion compared to the first 3 quarters of last year. Cash and cash equivalents also increased from $772 million in Q3 2021, to $1.05 billion in Q3 2022. Cash generated for the trailing twelve months is $2.09 billion.
With its solid financial results and cash flow generation, the company has already returned $1.9 billion to shareholders through buybacks and dividends through October 31 and now expects to return more than $2.7 billion to shareholders this year. The stock trades at a trailing EV/EBITDA of 18, which might appear high unless you consider that Marriott is now an asset-light licensing business with high margins.
A leveraged balance sheet, the rise of Airbnb and a potential global recession are some of the risks Marriott faces. The stock trades at a forward P/E of 20.24 and a forward EV/EBITDA of 15.85. Given the risks, I would prefer to see the valuation at a more attractive level before I would get interested in Marriott.
Welcome to edition 33 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. Azenta, Inc. (AZTA): $56.75
On November 14, 2022, the Board of Directors of this life sciences solutions provider approved a new share repurchase program authorizing the company to repurchase up to $1.5 billion of its class A common stock equal to nearly 43% of its market cap at announcement.
| Market Cap: $3.47B | Avg. Daily Volume (30 days): 869,437 | Revenue (TTM): $555.50M |
| Net Income Margin (TTM): 383.95% | ROE (TTM): -0.48% | Net Cash: $1.52B |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA (TTM): 65.65 |
2. Blue Water Vaccines, Inc. (BWV): $1.3499
On November 10, 2022, the Board of Directors of this biotechnology company approved a new share repurchase program authorizing the company to repurchase up to 5 million shares of its class A common stock equal to nearly 36.4% of its market cap at announcement.
| Market Cap: $19.83M | Avg. Daily Volume (30 days): 653,139 | Revenue (TTM): N/A |
| Net Income Margin (TTM): N/A | ROE (TTM): -80.44% | Net Cash: $29.14M |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA (TTM): 0.81 |
3. Valvoline Inc.(VVV): $33.53
On November 15, 2022, the Board of Directors of this automotive maintenance products and services provider approved a new share repurchase program authorizing the company to repurchase up to $1.6 billion of its class A common stock, representing nearly 28% of its market cap at announcement.
| Market Cap: $5.69B | Avg. Daily Volume (30 days): 1,696,935 | Revenue (TTM): $3.54B |
| Net Income Margin (TTM): 12.3% | ROE (TTM): 349.40% | Net Debt: $1.89B |
| P/E: 13.44 | Forward P/E: 26.11 | EV/EBITDA (TTM): 26.63 |
4. HireRight Holdings Corporation (HRT): $9.52
On November 14, 2022, the Board of Directors of this health screening services provider approved a new share repurchase program authorizing the company to repurchase up to $100 million of its class A common stock equal to nearly 16% of its market cap at the announcement.
| Market Cap: $756.70M | Avg. Daily Volume (30 days): 349,476 | Revenue (TTM): $829.84M |
| Net Income Margin (TTM): 14.02% | ROE (TTM): 28.3% | Net Debt: $557.46M |
| P/E: 5.27 | Forward P/E: 5.23 | EV/EBITDA (TTM): 7.95 |
5. Capri Holdings Limited (CPRI): $54.01
On November 9, 2022, the Board of Directors of this apparel, footwear, and accessories designer and distributor approved a new share repurchase program authorizing the company to repurchase up to $1 billion of its class A common stock, equal to nearly 15.4% of its market cap at announcement.
| Market Cap: $6.70B | Avg. Daily Volume (30 days): 2,135,011 | Revenue (TTM): $5.87B |
| Net Income Margin (TTM): 14.1% | ROE (TTM): 35.04% | Net Debt: $3.17B |
| P/E: 9.42 | Forward P/E: 7.99 | EV/EBITDA (TTM): 8.24 |
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