NEW YORK, Sept. 20, 2012 /PRNewswire/ -- S&P Dow Jones Indices announced today that preliminary results show that S&P 500 stock buybacks increased 32.6% to $111.7 billion during the second quarter of 2012, an increase from the $84.3 billion spent on buybacks during the first quarter of the year. The year-over-year gain was a mild 2.3% as the Index reversed the prior two quarters of reduced buybacks. 

"Company buyback activity increased significantly during the second quarter. The last time we have seen this level of activity was during the pre-recession heydays of 2005-2007," says Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. "While the second quarter produced a 3.3% broad decline in the equity markets, companies used the quarter to increase holdings, reduce share counts, and add a tail-wind to their eps during a quarter which set an operating record for profits."

Also of significance were M&A deals, which gave a boost to buybacks and reduced cash and equivalents for the second quarter in a row. Of note during the second quarter was Johnson & Johnson's $12.9 billion share repurchase as part of its Synthes deal and Express Scripts reducing its cash reserves by $8.2 billion as it combined with Medco.

On a sector basis, Silverblatt notes that S&P 500 Health Care issues dominated the quarter with $23.8 billion in buybacks, but excluding the Johnson & Johnson deal, would have ranked fourth behind Information Technology (which added $21.6 billion in buybacks), Consumer Discretionary ($17.3 billion), and Financials ($16.2 billion). 

Of note is AT&T, which returned to the buyback program during the first quarter with $2.1 billion in repurchases. The telecom giant added another $2.6 billion in buybacks during the second quarter, placing it as the fifth highest total for the quarter. American International Group, which purchased $2 billion in stock during the second quarter, recently completed a $5 billion repurchase. Johnson & Johnson's $12.9 billion in buybacks ranked as the highest expenditure in the quarter and was the second highest quarterly repurchase in history with the $15.7 billion spent by International Business Machines in the second quarter of 2007 still holding the record.

For the third quarter of 2012, Silverblatt sees additional improvement in S&P 500 buyback activity. "However, with average daily prices up 3% and quarter-to-date prices up over 7%, buyback dollars won't go as far as they did during the depressed second quarter.  S&P Dow Jones Indices is expecting to see higher EPS, due to an increase in buyback activity in at least 80 issues in their third quarter results. This will mean that investors again will need to look at the aggregate net income change, as well as earnings per share, when evaluating these issues." 

Historical S&P 500 buyback data can be found at: www.marketattributes.standardandpoors.com

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SOURCE S&P Dow Jones Indices