10 Stocks Shrinking Shares

Wall Street generally considers stock buybacks a bullish signal. Buybacks return capital to shareholders while they declare management's belief that its own cheap shares are its best return on investment. As long as profits remain consistent, share repurchases can even increase earnings per share, by dividing the same amount of earnings among a smaller pool of shares outstanding.

Today, we'll draw up a list of companies that have announced stock-buyback programs, and then we'll consult Motley Fool CAPS to see which of those companies the 84,000-plus-strong investor community favors most. If CAPS' top investors endorse the prospects of companies announcing buybacks, Fools should take notice.

Here are some of the latest companies to announce share-repurchase programs.

Investors at CAPS seem to like this group of companies, the majority of which have a rating of three stars or better. Yet just because a company has announced that it will buy back shares, that doesn't mean it will. A company is not obligated to repurchase shares just because it's announced its intention to do so.

The easy credit policies of the past few years have helped fuel buybacks. Companies didn't mind borrowing big bucks to repurchase their shares, even if those shares were trading at all-time highs. According to Standard & Poor's, there were $586 billion in buybacks last year amongst S&P 500 companies, with $138 billion in the fourth quarter alone. Yet that figure was well below the record $172 billion in the third quarter. With credit policies tight, we may be seeing far fewer share-repurchase programs in 2008.

Unable to cable together growth
It wasn't bad enough that the quarterly earnings report Arris Group issued more than a week ago missed analyst estimates by a wide margin. The company also had the misfortune of forecasting a weaker-than-anticipated first quarter, because it expects its largest customer to have lower demand for its products. As a result, the cable-equipment provider saw its shares plunge 30% on the news, though they've been inching back up since.

CAPS All-Star ddberg, with a 98.54 player rating, admits the earnings report wasn't the prettiest but says it's not useful to compare this last quarter with the year-ago period:

The decline in earnings is ugly, and they missed analyst estimates pretty badly, but comparing this last quarter versus the same quarter last year is hardly an apples-to-apples situation due to the tax situation ($40MM tax credit last year, $40MM tax hit this year). ... So we should be able to pick up a few CAPS points -- at least short-term -- as buys take advantage of today's huge drop.

Many CAPS players, OliverMcBubble among them, believe that the C-Cor merger will affect the performance in the near term, but that the buyback can ameliorate the situation. Player dominatorx, meanwhile, thinks the cable operators simply can't afford to cut back on spending for too long, particularly in the face of competition from the telephone companies:

Company is well positioned in the cable equipment space. Although some operators have cut back on spending in the near term, it is highly unlikely these cutbacks are sustainable. Increasing competition from the telcos should require increasing equipment spending by Arris' customers.

Foolish fallout
You've heard from your fellow investors -- now it's your turn. Motley Fool CAPS is a completely free, fun service where more than 84,000 investors have their say every day. Sign up for CAPS today, and share your best pitch for why your favorite stock will beat or lag the market.