Yahoo Finance Adobe's New Buyback Program to Boost Shareholders' Confidence
Adobe Systems ADBE has announced a new share repurchase program. The company’s board of directors authorized buy back of shares worth up to $8 million. This will be executed through the fiscal year 2021 and funded from the future cash flow generation.
The repurchases are likely to be made through both public market and structured share repurchase agreements with the third parties.
The new share repurchase program is appreciably higher than its previous share repurchase authorization of up to $2.5 billion through the fiscal year 2019. This is reflects the company’s solid balance sheet and strong cash flow generation.
With the latest announcement, Adobe aims at enhancing the shareholders’ value and return. Further, the company will be able to lessen dilution from the stocks issued as compensation to its employees.
We believe that the continued share buybacks will increase optimism on the stock and consequently be lucrative to investors.
Coming to the price performance, shares of Adobe have returned 36.4% on a year-to-date basis, outperforming the industry’s rally of 12%.
Strong Fundamentals Support Aggressive Buyback
Share repurchases actually benefit a company’s bottom-line as well as shareholder equity due to the reduction in the number of shares outstanding.
We note that Adobe has a strong capital management policy. The company remains committed to provide value to its shareholders by focusing on top-line growth with the support of its robust product portfolio and strength across geographies.
Further, Adobe’s robust Creative Cloud, Document Cloud and Marketing Cloud businesses remains positive for growing adoption of its cloud application.
Moreover, Adobe’s strong fundamentals aid its share repurchases initiatives.
In the fiscal first-quarter 2018, Adobe generated $989.6 million in cash from operations. Cash and investment balances were $6.14 billion which was up from $5.82 billion at the end of the fiscal fourth-quarter 2017. The company repurchased approximately 1.6 million shares for a total of $301 million.
Zacks Rank and Stocks to Consider
Currently, Adobe carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Cadence Design Systems CDNS, Citrix Systems CTXS and SAP SAP. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings per share growth rate for Cadence Design Systems, Citrix Systems and SAP is projected at 12%, 9.05% and 7.21%, respectively.
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