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

Competitors’ Moves

Among immediate competitors of Time Warner Inc (NYSE:TWX) and General Electric Company (NYSE:GE), 3M Co (NYSE:MMM) and DirecTV (NASDAQ:DTV) have both announced buyback or capital-return plans on a similar scale. In fact, DirecTV (NASDAQ:DTV) recently reauthorized a $6 billion share buyback program that it had initiated in April of 2012 and looks to continue putting its cash to work for the foreseeable future. DirecTV (NASDAQ:DTV) has only $1.9 billion in cash so it will have to do the buyback over a larger time frame.  However, with quarterly earnings increasing at over 30% year over year, it shouldn’t take too long to come up with the cash.  Meanwhile, 3M increased the size of its floating “buyback pool” to $7.5 billion and signaled that it intended to put it to work in a sustained fashion during the coming months. The pool now represents more than 10 percent of the company’s market cap.  3M has $4.5 billion on the balance sheet and an operating cash flow of $5.3 billion adding to the stockpile annually.

Long-term Outlook and Ways to Play

Although Time Warner Inc (NYSE:TWX) has undoubtedly endured some strategic misfires in the recent past, the company remains fundamentally healthy and may well boost its profile with its share buyback program. Meanwhile, General Electric is a known quantity that is often discounted due to its familiarity and conservative management philosophy. However, the company is clearly taking steps to change direction and focus on its core industrial holdings. This cash-return program may well boost its image even further and endear it to shareholders who normally avoid low-beta blue chip stocks.

In sum, the share buyback programs that General Electric Company (NYSE:GE) and Time Warner Inc (NYSE:TWX) recently announced are high-quality offerings that could reward shareholders for their patience and attract a diverse mix of fund managers, retirement investors and short-term traders. Investors who wish to play these deals would be best served by tiered long positions.

The article Big Share Buybacks Will Boost EPS originally appeared on Fool.com and is written by Mike Thiessen.

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