To compensate for mediocre profit growth forecasts for next year Teva Pharmaceutical
Teva, the world's largest generic pharmaceutical company, has estimated earnings will be between $5.48 and $5.68 a share in 2012. Teva also thinks it may miss its long-term target of $31 billion in sales by 2015, reports Bloomberg. The company reported its first decline in quarterly earnings in four years last month.
"There's a feeling that there needs to be a change in how the Teva management views their relationship with investors," said Natali Gotlieb, a Tel Aviv-based analyst for Israel Brokerage & Investments Ltd. The buyback plan is therefore "very good news."
According to the company no shares will be bought before fourth-quarter earnings are published in February.
Investing ideas -- buybacks
Buybacks, or share repurchases, are when a company purchases its own stock. This puts money in the pockets of shareholders while reducing the number of outstanding shares held by the public. The buying pressure tends to increase the value of the shares, as does the fact that there are now fewer shares outstanding.
Another side effect: Given the decreased number of shares, earnings per share will increase even if profits remain unchanged.
So, are there any other companies that are buying back their own shares? For ideas, we looked at companies that have recently announced significant buy backs of their own shares.
In addition, all of these companies are more profitable than their competitors, based on gross and net profit margins.
These buyback stocks have a track record of being more profitable than their competitors -- does that make their outlook even more bullish?
Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Zimmer Holdings
3. Packaging Corp. of America
4. St. Jude Medical
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
List compiled by Eben Esterhuizen, CFA. Kapitall's Rebecca Lipman and Eben Esterhuizen do not own any of the shares mentioned above. Profitabilitydata sourced from Fidelity.
The Motley Fool owns shares of Zimmer Holdings, Teva Pharmaceutical Industries, and St. Jude Medical. Motley Fool newsletter services have recommended buying shares of Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.