October brought a lot of volatility to the market despite a fairly strong earnings season. Concerns over rising interest rates and a trade war with China spooked the market and overshadowed an earnings season where around 75% of companies that have reported have posted better than expected quarterly profits.
While the strong quarterly reports have yet to really have a positive impact on the market, there is a good chance that we do see an earnings rally as companies start to emerge from their buyback blackout periods.
There is no firm rule on the timing of a company’s blackout period, but typically it lasts from the last two weeks of the quarter until 48 hours following the quarterly report. Given the selloff that occurred in October when the majority of companies were in their blackout period, you can expect to see companies that have buyback programs in place to start repurchasing their stock.
Buybacks have helped boost the market higher and have provided a lot of support during previous market downturns, and October’s sell off has created some great buyback opportunities for companies that have plans in place.
As blackout periods end, the overall market should trend higher, and here are five companies with buyback programs that will likely trend higher with the overall market.
International Business Machines
International Business Machines (IBM) reported its quarterly numbers mid-October, and the results were not stellar. The company topped estimates on the bottom line, but sales fell short of analyst estimates and the stock took a hit. The stock is also under pressure after the company announced plans to purchase RedHat (RHT) for $34 billion. At the end of October, the company announced it had added $4 billion to its share buyback program, in addition to the $1.4 billion that was left over at the end of the third quarter. With the stock down significantly since the start of October, the company obviously feels now is a great time to repurchase some shares at a discount, which in turn should drive shares higher. IBM will suspend its buyback program in 2020 and 2021 to help fund the RedHat acquisition, but its current buyback program should bring some strength and stability into the stock after a rough October. IBM trades at $122.48 with an average price target of $162.44.
Cosmetics company Estee Lauder (EL) had a rough October, but the stock was able to erase much of the October losses following an upbeat quarterly report at the end of the month. Estee Lauder posted a big earnings surprise and sales were also better than expected. In addition to the earnings surprise, the company also announced it would purchase 40 million outstanding shares, which accounts for around 11% of the company’s total outstanding stock. Analysts expect El to continue building on its recent gains with an average price target of $155.56 versus the current price of $142.10.
Maxim Integrated Products
Semiconductor maker Maxim Integrated Products (MXIM) sold off sharply in October with the overall market, but an upbeat quarterly report at the end of the month brought enthusiasm back into the stock. Shares rallied on the strong quarterly numbers but are still down over 8% from the start of October. In addition to the quarterly numbers, Maxim announced its board had approved an additional $1.5 billion to its buyback program. The company noted that given the recent drop in share price its buyback in the current quarter will double that of last period. MXIM trades at $51.90 with an average price target of $57.23.
Nutrisystem (NTRI) has had a tough year in 2018. The stock got hammered at the start of the year, and after rebounding through the summer once again moved lower in September and October. The stock did get a boost at the end of October after posting better than expected Q3 earnings while sales for the quarter were weaker than expected. With the stock currently down 27% year to date, the company’s board has approved the buyback of $75 million worth of the company’s outstanding stock, which accounts for around 7.7% of all outstanding shares. While the stock remains sharply lower on the year, shares have made back their October losses and analysts see additional upside, which should be supported by the company repurchasing nearly 8% of its total outstanding shares. NTRI trades at $37.25 with an average price target of $45.50.
Tech giant Apple (AAPL) saw its stock take a bit hit following the company’s quarterly report at the start of November. Earnings and sales were both well above estimates, but the stock took a hit due to the company selling few iPhones than analysts expected. Apple may have sold fewer iPhones in the quarter than expected but because the company was able to sell the devices at a higher price total iPhone sale were strong. The average price for each phone sold in the quarter was $793, blowing away the $750.93 expectation. Analysts did not like to see the company miss its unit sales estimate, and they really did not like the news that Apple would no longer break out iPhone sales in its quarterly report, and the stock moved lower. Apple has around $237 billion in cash (yes, you read that right), and the company is in the middle of a $100 billion share buyback program that was announced in May, and the company is likely to use the recent sell off to put a lot of that cash to work buying back shares. AAPL trades at $203.19 with an average price target of $234.82.