Apple Q1 earnings: Will buyback be part of the discussion?

Carl Icahn is but one of many Apple investors hoping that an aggressive share repurchase plan is in the offing, and a new research report from S&P Capital IQ suggests it should probably happen sooner than later.


Apple's first-quarter results will be released Monday afternoon and analysts are expecting sales in the vicinity of $57.5 bn and earnings of around $14.09 a share.

While much of the focus will be on just how enthused holiday shoppers were about the iPhone 5S, 5C and iPad Air , investors will be just as interested to find out if Apple has any new plans to repurchase shares and supercharge its stock price.

Much has been said and written about Carl Icahn's incessant badgering of CEO Tim Cook and the rest of Apple's board to buyback about $150 billion in stock, a "no-brainer" in Icahn's view that would go a long way toward properly valuing the stock and – not insignificantly – deliver a huge windfall from his roughly $3.6 billion investment to date.

Just one day after he used the combination of his Twitter account and a seven-page letter to Apple shareholders to lambaste the board for its "disservice" to investors, Icahn found some support from an S&P Capital IQ research report that basically validated his position.

So much so, in fact, that it placed an Icahn quote about the responsibility of boards to recognize opportunities to increase shareholder value by executing "large and well-timed" buybacks atop the report. So there's that.

But the main takeaway from the report, authored by analysts Paul Fruin and Li Ma, is that companies that authorize and announce share buybacks have enjoyed statistically and economically significant outperformance following the announcements – and that trend has held firm for the past nine years.

And while these stocks' outperformance is typically greater among smaller-cap stocks, large-cap stocks tend to get a pronounced and significant boost much faster – usually within the first few trading days.

As an anecdotal example, S&P Capital IQ pointed to the sharp ascent Tibco Software enjoyed after it announced a significant (10 percent of its outstanding market value) share repurchase plan in April. After a four-week slide during which Tibco shares lost 4 percent of their value, the stock immediately edged up 0.7 percent in the first day of trading following the announcement en route to an 11-percent advance within four weeks. Three months later, the stock had surged up more than 25 percent.

Yahoo is another prime example of how an aggressive stock repurchase plan can help play a central role in electrifying shares .

Of course, many other factors – not the least of which is the market's overall performance – can also help explain the immediate and sustained spike in a stock's performance following a repurchase plan announcement.

"The magnitude of the planned buyback, and the concurrence of corporate insider net buying near the time of the repurchase announcement have been shown to be informative overlays associated with enhanced post-buyback performance," the report added.

Apple, meanwhile, contends that it's already done plenty to create value for its shareholders – including spending more than $23 billion of the $60 billion share repurchase authorization it made for fiscal 2013 alone.

We'll soon see if that's going to change in fiscal 2014.