The stock buyback craze has continued into the second quarter, and the cumulative effect of that craze—now almost two years old and counting—is really mounting.
First, one clarification: Many companies buy back stock, but they use it to pay out options they give out to employees. What investors care about is when there is an actual share count reduction, because that increases the earnings per share and decreases price-to-earnings levels.
By that measure, the reduction in share count has been notable for the last five quarters, and is continuing into the second quarter.
The trend is up. Twenty percent of S&P 500 companies have reduced their share count by at least 4 percent year over year in each of the last five quarters, and that appears to be continuing into the second quarter, according to Standard and Poor's.
As of last night, 92 companies have reported; 20 have reduced their share by at least 4 percent year-over-year.
That means earnings is 4 percent higher and P/E is 4 percent lower than a year ago for those companies.
One shining example is Apple, which has reduced its share count by 4.7 percent year-over-year, and 10.3 percent in the last two years, meaning earnings are 10 percent higher than two years ago, regardless of whether sales were higher or costs were lower!
Pretty cool, huh?