Yesterday, the top Telecommunications and Industrial Sector buybacks of the S&P 500 during Q4 2012 were reported and AT&T (NYSE:T) and General Electric (NYSE:GE) were the only two to show up in the top 20 list that weren't accompanied by one of their industry sector peers.
From this report, AT&T came in second only to Exxon Mobil (NYSE:XOM) with $4.378 billion in shares repurchased. It was the only company in the telecommunication services sector to make the top 20 list. Also standing alone was General Electric, from the industrials sector with $2.835 billion in shares repurchased (GE had the 6th largest buyback in Q4 2012). Below is a fundamental analysis of the two that I feel are investment worthy based off of their cashflows and shareholder returns.
AT&T has a market cap of $201.1 billion and currently trades for $36.62 per share. Shares are up 10% YTD and trade only 3% off their 52 week highs. Analysts currently have a mean target price on AT&T shares of $36.64 and a median target price of $37.00.
Positives for AT&T
- While shares currently trade at the industry averages P/E of 29.0, AT&T's net margin of 5.7% and ROE of 7.3 are both above the industry averages 3.5% and 5.3 respectfully.
- In addition to the large buybacks, the dividend yield on shares is currently 4.82%.
- On revenues of $127.4 billion, AT&T produced $39 billion in cash from operations in 2012 (30%).
General Electric has a market cap of $239.57 billion and currently trades for $23.10 per share. Shares are up 10% YTD and only 3% off their 52 week highs. Analysts have mean price target of $25.33 and a median price target of $25.00.
Positives for General Electric
- P/E of 16.6 and P/B of 2.0 are both under the industry averages 21.7 and 2.6 respectfully.
- Net margin of 9.3% is above the industry averages 8.8%.
- In addition to share repurchases, GE has a dividend yield of 3.11%.
- On $147.35 billion in revenue in 2012, GE had $31 billion in net cash from operations (21%).
- Stronger balance sheet: in the last 5 years, GE has paid off $131 billion in debt.
Investors have to like the massive amounts of money these two companies are producing and especially more because they are returning a large amount directly to investors. In addition to purchasing shares directly, a more diversified investment can be made by purchasing the following ETFs that have both AT&T and General Electric as two of their top 10 largest individual holdings:
Top Energy Buybacks can be found here.
Top Financial Buybacks can be found here.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.