Fourth-quarter earnings per share could be artificially boosted by stock buybacks for the first time since 2007, Howard Silverblatt, senior index analyst at Standard & Poor’s told CNBC.com.
At least 45 companies have bought back enough shares this year to raise earnings-per-share at least five percent above their actual earnings in the fourth quarter, Silverblatt said.
That fact is likely to trip up investors and analysts who may not take the buybacks into account when calculating earnings. That's because stock buybacks haven't been a significant factor in earnings since 2005 to 2007, when companies routinely bought back shares, he says.
“We were all very conscious of that several years ago, but not as much so recently,” Silverblatt said.
The percentage increase for earnings-per-share may actually be higher once fourth quarter buybacks—which haven’t been reported yet—are taken into account, Silverblatt adds.
Consumer discretionary stocks and consumer staples are among the sectors that have bought back the most shares, while banks have bought back the fewest, he says.
Some of the 45 companies with significant buybacks through the third quarter are here, followed by the percentage reduction in their shares so far this year:
- H & R Block : 8.2 percent
- Coach : 6.3 percent
- Dr. Pepper : 6 percent
- DirectTV : 8.2 percent
- Gap : 9.7 percent
- Medco Health Solutions : 10.3 percent
- Travelers : 12.6 percent
- Yahoo : 5.2 percent
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