In a drive to reward shareholders, Avis Budget Group, Inc. (CAR - Free Report) announced a hike in its share buyback plan, following which shares of this car-rental company jumped 2.6% on the index.
Per the announcement, management announced an increase of $250 million to the company’s buyback authorization, thus making shares worth nearly $400 million available for repurchase from Oct 1, 2016 onward. Notably, the new authorization reflects the company’s sound financial position and favorable prospects.
Avis Budget has long been focused on boosting shareholder value and making efficient capital allocation. Ever since it announced its Aug 2013 repurchase program, the company has bought back shares worth over $1 billion. In third-quarter 2016 alone, the company repurchased nearly 3.1 million shares worth $110 million. With this, the company has bought back roughly 9.5 million shares for $290 million in the first three quarters of 2016.
Well, it is Avis Budget’s strong balance sheet, along with its cash flow generation ability that provides it with the financial flexibility to undertake shareholder-friendly moves. Evidently, the company generated $2,101 million as cash flow from operating activities, and had cash and cash equivalents of $985 million as of Sep 30, 2016.
Further, with the third-quarter earnings release, management stated that it anticipates generating free cash flow worth $450–$500 million in 2016. Also, it modified its share buyback projection for 2016 to $370–$400 million, from the previous plan of $300−$400 million. All these moves depict the company’s ability to boost cash flows in the long run.
Share repurchase programs and dividend payments are frequent among companies with a stable cash position and healthy cash flow. While Avis Budget flaunts a strong share buyback history, big-wigs like NIKE, Inc. (NKE - Free Report) , Tractor Supply Company (TSCO - Free Report) and PVH Corp. (PVH - Free Report) are also known for their shareholder-friendly moves.
Among these, farm and ranch-store retailer, Tractor Supply recently raised its share buyback authorization by $1 billion, thereby bringing its current total authorization to $3 billion. Announced in Feb 2007, this repurchase plan was extended through Dec 31, 2020.
Coming back to Avis Budget, we believe that the company remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value through dividend payouts and share buybacks. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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