🗞 6 Stocks Ramping Up Buybacks

Happy Sunday!

Here’s what’s on the docket for this week’s newsletter:

• 🍔 McDonald’s E-Coli Scare

• ☕️ Starbucks in Distress

• 📈 6 Stocks Ramping Up Buybacks

And much more, let’s dive in!

News of the week

• 🍔 McDonald’s E-Coli Scare: On Tuesday, the Center for Disease Control and Prevention announced that an E-Coli outbreak linked to McDonald’s famous Quarter Pounder burger had led to the hospitalizations of 10 people and even one death.

  The majority of the reported illnesses have been in Colorado and Nebraska, and after an initial company investigation McDonald’s found that the illnesses may be linked to slivered onions from a single supplier in that area. To prevent any further spread, McDonald’s removed the Quarter Pounder from the menus of certain locations in 12 different states.

  In a video published by the company, McDonald’s US President Joe Erlinger stated “We are working quickly to return our full menu in these states as soon as possible”.

  McDonald’s stock dropped as much as 9% on the news but recovered some throughout the week.

• ☕️ Starbucks in Distress: On Tuesday, the world’s largest coffee company Starbucks announced preliminary results that showed further declines in the company’s top-line.

  Global comp sales declined by 7% driven predominantly by lower traffic across its stores. The company also suspended its 2025 financial guidance due in part to the recent CEO transition as well as the “current state of the business.”

  In response, Starbucks unveiled its new ‘Back to Starbucks’ strategy where it intends to focus on the traits that has set Starbucks apart in the past.

  Newly appointed CEO Brian Niccol stated “I’ve heard from some customers that we've drifted from our core, that we’ve made it harder to be a customer than it should be… we need to fundamentally change our recent strategy.”

  Starbucks stock dropped immediately following the announcement but ended the week flat.

Earnings Roundup

• 🚗 Tesla: Leading EV manufacturer Tesla reported better than expected earnings on Wednesday helping to propel the stock up more than 20% on the week.

  While revenue came in just under analyst’s estimates, profit margins for the quarter were much better than anticipated boosted in large part by $739 million in environmental regulatory credits.

  CEO Elon Musk stated on the conference call that he believes vehicle growth will be somewhere between 20%-30% for 2025 and that “we'll be able to have driverless Tesla's doing paid rides next year”.

  While Musk is known for making aggressive assumptions, shareholders were nonetheless pleased with the report as the gains this week amounted to more than a $150 billion increase in Tesla’s market cap.

• 🛫 Boeing: The last 5 years have been brutal for Boeing shareholders, and this quarter was no exception. Boeing reported more than a $6 billion net loss (its largest loss since 2020), and worse yet, there doesn’t appear to be any end in sight after the Machinists Union rejected the latest proposal which included a 35% wage increase over 4 years.

  As the strike continues, it’s estimated that Boeing is losing anywhere between $500 million and $1 billion per week. That’s a substantial amount considering that Boeing has just $10 billion in cash currently on its balance sheet.

  Boeing’s new CEO Kelly Ortberg stated “It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic

  company and aerospace leader once again.”

  While Boeing management has announced plans to raise more cash, an equity issuance becomes only more dilutive as the company’s stock continues to fall.

  Boeing’s stock closed down just over 3% this week.

• 🚬 Phillip Morris International: The company behind leading nicotine brands like Marlboro, IQOS, and Zyn reported earnings that outpaced analyst expectations.

  The company’s “combustibles portfolio”, which is mostly comprised of leading cigarette brands, delivered 5% revenue growth for the quarter driven primarily by price increases.

  Additionally, Phillip Morris continues to establish itself as the leader among reduced-risk product categories like oral nicotine and heat-not-burn technology. The company delivered yet another quarter of double-digit growth for its reduced-risk portfolio, which now accounts for 37% of overall revenue.

  Phillip Morris’ stock closed up 8% this week.

• 👟 Deckers: The world’s 3rd largest footwear company by market cap Deckers, reported strong 2nd quarter results on Thursday.

  Deckers, which is home to brands like Ugg, HOKA, and Teva, delivered 20% revenue growth for the quarter despite many consumer-facing companies reporting macro economic headwinds.

  Beyond the strong top-line growth, Deckers expanded its gross margins by 250 basis points which helped to grow earnings per share by 39% compared to a year ago.

  After this week’s 4% gain, Deckers is now a more than 75-bagger over the last 20 years.

6 Stocks Ramping Up Buybacks

Share buybacks are functionally a way for companies to return cash to their shareholders. While repurchases aren’t always timed well, an increase in the amount of money allocated to repurchases can be an indication that management believes the stock is undervalued.

With that said, here are 6 companies that have recently started pouring more cash into share buybacks:

1.) Monster Beverage

Monster Beverage is one of the largest energy drink makers globally. Its drink portfolio includes brands such as Monster, Bang, NOS, Reign, and several others.

• Market Cap: $52.7 billion

• Buybacks Over the Last 12 Months: $3.8 billion

• EV/EBIT: 25x

• Buyback Yield: 7% (elevated due to one-time dutch auction tender offer)

2.) Alibaba

Alibaba is one of China’s largest tech companies that operates a leading Chinese wholesale marketplace.

• Market Cap: $230 billion

• Buybacks Over the Last 12 Months: $18 billion

• EV/EBIT: 12.4x

• Buyback Yield: 8%

3.) DR Horton

DR Horton is the largest homebuilder in the US by volume. They sell primarily entry-level homes (70% of their homes are below $400k) across 33 different states

• Market Cap: $61 billion

• Buybacks Over the Last 12 Months: $1.7 billion

• EV/EBIT: 10x

• Buyback Yield: 2.7%

4.) United Rentals

United Rentals is the largest equipment rental company in the world. United leases its wide range of equipment from its vast store network that spans 49 states.

• Market Cap: $55 billion

• Buybacks Over the Last 12 Months: $1.4 billion

• EV/EBIT: 16.7x

• Buyback Yield: 2.4%

5.) Adobe Inc.

Adobe offers a range of software applications that helps creative professionals design and create.

• Market Cap: $219 billion

• Buybacks Over the Last 12 Months: $8.7 billion

• EV/EBIT: 29x

• Buyback Yield: 3.8%

6.) Lululemon

Lululemon is a leading American-based apparel retailer that helped pioneer the “athleisure” category.

• Market Cap: $37 billion

• Buybacks Over the Last 12 Months: $1.2 billion

• EV/EBIT: 15.8x

• Buyback Yield: 3.2%

Meme of the week

Parents, please check your kids’ Halloween candy carefully. Just found Boeing’s Q4 Report inside this Snickers Bar 🤮 

‘Tis the season!

With Halloween (and earnings season) next week, this is your friendly reminder that there’s no quicker place to track your companies’ quarters than FinChat.io.