How Much Stock Did Apple Inc. Repurchase Last Quarter?

Apple (NASDAQ: AAPL  ) steps up to report earnings tomorrow after the close. Of course, the headliners will be things like iPhone unit sales and gross margins, but what about Apple's share repurchase activity? The Mac maker has committed to an aggressive capital return program that is heavily weighted toward buying back stock.

The magnitude of Apple's share repurchase authorization is nothing short of breathtaking: Apple increased the total authorization last quarter to $90 billion, after completing the majority of the previous $60 billion total authorization ahead of schedule.

In fact, Apple's repurchases have largely driven the growth in earnings per share in recent quarters. For instance, net income increased 7% last quarter, while earnings per share jumped 15%. That's what I call accretion.

2 pictures are worth $46 billion
This is how the outstanding share count used in calculating diluted earnings per share has dropped since Apple initiated stock buybacks. The 7-for-1 split occurred during the June quarter, so I'll use pre-split figures for now.

Source: SEC filings. Figures shown on a pre-split basis. Calendar quarters shown.

Let's look at Apple's historical repurchase activity to set investor expectations about the June quarter's buybacks. The company had repurchased $46 billion in stock through the end of March. Apple occasionally uses accelerated share repurchase, or ASR, programs to supplement open market purchases.

Source: SEC filings and conference calls. Calendar quarters shown.

ASR programs take time to run their course. Apple's current $12 billion ASR program will conclude by this December, so don't expect any more ASR programs until 2015. Instead, investors should look at open market repurchase activity. Apple has slowly ramped up its open market repurchases, from $4 billion in Q2 2013 to nearly $6 billion last quarter.

Still undervalued?
Here's the interesting thing though. Back when Apple was in the dumps and it was painfully obvious that shares were undervalued, it made plenty of sense to be aggressive in buying back stock. After all, that's partially why Apple initiates ASR programs (the most recent one was done in response to the January earnings sell off).

Yet, as shares have recovered in the past year and are approaching all-time highs again, the valuation theoretically becomes less compelling. Apple has not dampened its open market buybacks despite its recovery. That suggests that management still considers shares undervalued. It's probably worth noting here that companies aren't generally good at timing buybacks though.

Apple's average stock price during the second quarter was $85. If Apple repurchased $6 billion in stock around that average price, that would retire over 70 million shares (post-split). What were we saying about earnings accretion?

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

 

Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 22, 2014, at 11:51 AM, TMFAeassa wrote:

    Fantastic analysis, Evan!

  • Report this Comment On July 23, 2014, at 6:09 PM, 0gre wrote:

    Apple has publicly stated that they have the best product line-up they've had in 25 years this fall. If this is true, the buybacks make sense right now.

    If they don't have this amazing product line-up... then buying back shares at the all-time-high isn't so great.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3036897, ~/Articles/ArticleHandler.aspx, 12/19/2014 1:14:09 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement