4 Mega-Cap Stocks With The Largest Share Buyback Activities

Includes: IBM, JNJ, T, XOM
by: Nick Chiu

Share buyback, or stock repurchase, is the reacquisition by a company of its own stock. In the United States, the cash is exchanged to reduce the number of shares outstanding. After the share buyback, the company can either keep the repurchased shares as treasury stocks, which can be re-issued in the future, or retire the repurchased stocks. In this article, 4 companies with top share buyback activities will be presented.

Top Mega-Cap Companies By Dollar-Value Buybacks - Trailing 12 Months

Name (Ticker)


TTM Buybacks ($M)

% Change in Shares


Market Cap


Dividend Yield

Exxon Mobil Corp. (NYSE:XOM)








Johnson & Johnson (NYSE:JNJ)

Health Care















AT&T Inc. (NYSE:T)

Telecom Services







Source: FactSet Research Systems and Google Finance

Date: December 20, 2012

Exxon Mobil Corp.

Exxon Mobil Corporation, engaged in the exploration, production, transportation and sale of crude oil and natural gas, is a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a range of specialty products. XOM closed at $88.36 with an 0.18% loss on February 15, 2013. XOM had been trading in the range of $77.13-$93.67 in the past 52 weeks.

On February 14, 2013, Exxon Mobil and Russian partner Rosneft agreed to expand their cooperation under their 2011 Strategic Cooperation Agreement. The new agreement will give Exxon Mobil exploration access to an additional 234,000 square miles in the Russian Arctic. A separate agreement will give OAO Rosneft the opportunity to acquire a 25 percent interest in the Point Thompson unit on Alaska's North Slope. Exxon Mobil and Rosneft have also agreed to conduct a joint study on a potential LNG project in the Russian Far East.

Share Buyback: The amount of outstanding shares for XOM had reduced 4.9% in the period of trailing 12 months as of December, 2012. XOM will buy back $5B worth of shares in Q1 2013, which will further reduce the number of outstanding shares and benefit XOM shareholders.

Fundamentally, XOM has an enterprise value of $397.17B. XOM has a total cash of $13.05B and a total debt of $12.42B. XOM has a book value of $36.56 per share. Comparing to its peers in the oil & gas integrated industry, XOM has higher operating margin of 16.0% and net margin of 9.1%, ttm, (vs. the averages of 14.4% and 8.1%, ttm, respectively) with a higher ROE of 27.5 (vs. the average of 19.2). XOM's P/E of 9.3 is lower than the industry average of 9.8 and XOM's 5 year average of 11.5. XOM's forward P/E of 9.9 is lower than the S&P 500's average of 14.0.

Johnson & Johnson

Johnson & Johnson is the world's largest and most diverse healthcare company, which is composed of three divisions: pharmaceutical, medical devices and diagnostics, and consumer. JNJ closed at $76.16 with a 0.46% gain on February 15, 2013. JNJ made a new 52-week high of $76.96 on the last trading day.

On January 22, 2013, JNJ reported better-than-expected Q4 earnings. JNJ is mulling the sale or spinoff of its Ortho Clinical Diagnostics business, which makes equipment and supplies for detecting and diagnosing diseases.

Analysts' call: Credit Suisse downgraded JNJ from Neutral to Underperform, and raised the price target from $71 to $73 on February 7, 2013. Credit Suisse commented:

"Concurrent with Credit Suisse rating methodology requiring that ratings now reflect an expectation of relative out/(under) performance versus an analyst's coverage universe, we downgrade JNJ to Underperform from Neutral. While we advocate overweight positions in pharma stocks and acknowledge the stock's "index importance", JNJ offers the lowest total return in our coverage universe (dividend plus equity), hence this change. Along with adjustments to target price to other stocks in our sector, we raise JNJ's target to $73 from $71, below its current level of $75."

Concerns: JNJ recalled a second type of metal hip component that it sold outside of the United States in January. According to the report from Reuters, "J&J's DePuy unit told doctors in January that the Adept modular heads, a component used with its Adept metal-on-metal hip replacement device, should not be used after data showed that the devices were failing at a higher than expected rate, according to an emailed statement." On February 14, 2013, Business Insider reported that Warren Buffett's portfolio lowered its stake in Johnson & Johnson.

Share Buyback: Johnson & Johnson has been protecting the shareholder base from dilution by using share repurchases, as the company was making some acquisitions using JNJ's shares. According to the news release, "Janssen Pharmaceutical, a wholly-owned Irish subsidiary of Johnson & Johnson, has entered into accelerated share repurchase (ASR) agreements with Goldman Sachs & Co. and JPMorgan Chase Bank, N.A. to purchase a combined total of 203.7 million shares of Johnson & Johnson common stock for an initial purchase price of $12.9 billion. Under the ASR agreements, Janssen Pharmaceutical will purchase shares of Johnson & Johnson common stock that the banks will have borrowed from stock lenders, and during the term of the ASR agreements, the banks are expected to purchase approximately $12.9 billion of shares in the open market to return to those stock lenders. The shares purchased under the ASR agreements, together with cash on hand from Janssen Pharmaceutical, will be used by Janssen Pharmaceutical to provide the merger consideration for the purchase of Synthes." JNJ had commenced several steps to finance the M&A transaction in an efficient manner to enhance shareholder value.

Fundamentally, JNJ has an enterprise value of $208.14B. JNJ has a total cash of $19.77B with a total debt of $16.85B. JNJ has a book value of $23.08 per share. JNJ has lower revenue growth (3 year average) of 0.7, as compared to the industry average of 6.9. JNJ has higher operating margin of 23.8%, ttm, comparing to the average of 22.3. JNJ has lower net margin of 12.9%, ttm, as compared to the average of 16.4%, ttm. JNJ has a lower ROE of 13.6 (vs. the average of 17.2) and higher P/E of 25.1 (vs. the industry average of 18.2). JNJ's forward P/E of 12.8 is lower than the S&P 500's average of 14.0.

IBM Corp.

International Business Machines Corporation is an information technology company operating in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology and Global Financing. Each of these businesses is an industry leader in its own right, and the combination of these products and services provides IBM with an unrivaled solution creation and delivery ability that is the key to its wide economic moat. IBM closed at $200.98 with a 0.67% gain on February 15, 2013. IBM had been trading in the range of $181.85-$211.79 in the past 52 weeks.

On February 7, 2013, IBM completed the acquisition of StoredIQ, a privately held company based in Austin, Texas. According to the press release from PR Newswire, "The acquisition advances IBM's efforts to help clients derive value from big data, respond more efficiently to litigation and regulations, and dispose of information in an automated way that has outlived its purpose." This acquisition further enhances IBM's offerings to improve information economics. On January 23, 2013, IBM was upgraded by Societe Generale from Sell to Hold.

Share Buyback: In October 2012, IBM's board had added $5 billion to its stock buyback program, bringing the total buyback authorization to $11.7 billion. The total buyback authorization is equivalent to 5 percent of IBM's outstanding shares. The shareholders' value will continue to be increased with the strong share buyback activities.

Fundamentally, IBM has an enterprise value of $247.24B. IBM has a total cash of $11.13B with a total debt of $33.27B. IBM has a book value of $16.84 per share. IBM generates an operating cash flow of $19.60B with a levered free cash flow of $15.72B. IBM has lower revenue growth (3 year average) of 1.0, as compared to the average of 8.0. IBM has higher operating margin of 19.0%, ttm, and net margin of 15.5%, ttm, comparing to the averages of 11.5% and 13.6%, ttm, respectively. IBM generates a stronger ROE of 74.2, comparing to the average of 38.8. IBM's P/E of 14.5 is lower than the industry average of 15.2, but higher than IBM's 5 year average of 12.6. IBM's forward P/E of 11.3 is lower than the S&P 500's average of 14.0.

AT&T Inc.

AT&T Inc. is a holding company providing wireless and wireline telecommunications services and equipment, as well as directory advertising and publishing services in the United States and internationally. T closed at $35.36 with a 0.20% gain on February 15, 2013. T had been trading in the range of $29.95 to $38.58 in the past 52 weeks.

On February 14, 2013, AT&T won a ruling (case of AT&T Mobility LLC v. AU Optronics Corp, 9th U.S. Circuit Court of Appeals, No. 11-16188) from a federal appeals court in a lawsuit against liquid crystal display panel makers alleging a price-fixing conspiracy.

AT&T is expanding its 4G LTE coverage by upgrading 7 mobile data sites in Fayetteville, NC. According to a Zacks report, these upgrades will enable AT&T to gain significant momentum in the 4G market. AT&T is aiming to enhance its high-speed wireless network, and is on track to deploy 4G LTE services as soon as possible to achieve its set target to connect 300 million people in the U.S. by the end of 2014.

Share Buyback: According to a report from Investor's Business Daily, AT&T's stock repurchase program has picked up steam, boosting EPS and giving it currency for possible acquisitions. UBS estimates that AT&T would spend about $7.5 billion in the first half of 2013. AT&T had bought back 126.6 million shares during the fourth quarter for $4.4B

Fundamentally, T has an enterprise value of $262.32B. T has a total cash of $4.87B with a total debt of $69.84B. T has a book value of $16.55 per share. T has a higher revenue growth (3 year average) of 0.7, as compared to the industry average of -2.7. T has a lower operating margin of 7.8%, ttm, as compared to the average of 11.7%, ttm. T has the same net margin of 3.5%, ttm, as the industry average. T generates a lower ROE of 4.1, comparing to the average of 5.3. T's forward P/E of 13.5 is lower than the S&P 500's average of 14.0.

In short, Exxon Mobil, Johnson & Johnson, IBM, and AT&T are great long-term holdings for conservative investors who seek stability and dividend income. All four companies have a strong economic moat and provide high liquidity. XOM has the largest market cap of $397.80B with the lowest beta of 0.5. XOM had reduced the most percentage of shares outstanding with a 4.9% reduction in the trailing 12 month period. On the other hand, T offers the most attractive dividend return at 5.09% with a relatively low beta of 0.56.

Note: This list is only provided as the starting point for interested investors to research further. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

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.