General Electric Company (GE), Time Warner Inc (TWX), DirecTV (DTV): Big Share Buybacks Will Boost EPS

Page 1 of 2

Two large-cap companies are making waves with announcements that they will be returning billions of dollars in capital to their shareholders over the next several months. While dozens of companies have declared special dividends and share buybacks during the past year, General Electric Company (NYSE:GE) and Time Warner Inc (NYSE:TWX) are unique for their below-market valuations and strong strategic outlooks. It seems likely that these buyback programs could attract significant new investment in these relatively staid stocks. More importantly, they might provide a short-term price pop for investors with tight time horizons.

General Electric Company (GE)

About General Electric and Time Warner

Based in Fairfield, Connecticut, General Electric is a major industrial, healthcare and financial conglomerate that engages in a wide range of operations in a number of countries around the world. The company makes medical devices, jet engines, power equipment, household appliances, industrial machinery, lighting fixtures, cleaning devices, and compression and transportation devices. It also engages in a variety of financial activities through its General Electric Company (NYSE:GE) Capital subsidiary and owns stakes in several banking firms. General Electric Company (NYSE:GE) earned nearly $15 billion on gross revenues of $146.8 billion in 2012. It employs around 300,000 people.

New York-based Time Warner is an integrated media company that operates a cable provider, produces content and media for television and online consumption, and owns a number of print-media properties. It should be noted that the company is in the process of a restructuring campaign that will see the bulk of its print media holdings spun off into a new public concern known simply as “Time.” After the spin-off, Time Warner Inc (NYSE:TWX)’s principal holdings will include its cable network, the various cable properties that it owns, and a number of other miscellaneous media-related businesses. The company employs about 34,000 people and earned $3 billion on gross revenues of $28.7 billion in 2012.

Terms of the Buybacks

As noted, a number of companies have recently announced buyback or special-dividend plans. However, GE and Time Warner are both significantly undervalued relative to the broader market. In particular, Time Warner Inc (NYSE:TWX) currently trades at an implied discount of 28 percent. For its part, General Electric Company (NYSE:GE) trades at an implied discount of around 15 percent.

Time Warner has indicated that it intends to allocate at least $4 billion to its share buyback program and boost its dividend by nearly a fifth. At its current share-price levels, a $4 billion buyback would represent nearly 10 percent of Time Warner’s current market capitalization. By any standards, this is a huge move that could boost the company’s shares by 10 percent or more in the short term. After factoring in the dividend increase, shareholders who buy into Time Warner Inc (NYSE:TWX) at these levels could earn 11 percent or more on their investments.

In absolute terms, General Electric Company (NYSE:GE)’s plans are even bigger. Although it has not yet provided specific terms, the company has confirmed that it plans to use $18 billion in cash to fund some combination of buybacks and dividend hikes over the coming fiscal year. This represents about 7.5 percent of General Electric’s current market capitalization and could provide a similarly sized return for shareholders in the near term. Since GE shares have been locked in a secular uptrend for the past several months, this move could add to their momentum and provide an even more impressive return over a longer time frame.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!