A December 24th report from FactSet Insight points out that S&P 500 companies are finally starting to slow down their cash hoarding. The report highlights that the total cash and short-term investment holdings among the firms on the index ticked up just slightly to $1.37 trillion at the end of the third quarter.
Sector breakdown of S&P 500 firms cash holdings
Five sectors saw a year-over-year increase in cash balances in the third quarter, with the Health Care and Information Technology sectors leading the way. Four sectors saw a drop in cash balances, led by the Telecom Services sector.
Cash balances for the Health Care sector were up by 10.9%. Health Care had the second highest cash balance (ex-Financials) at $217.3 billion. The biggest gainers in cash balances in this sector were: Johnson & Johnson (+$7.8 billion), Amgen (+$5.5 billion), Bristol-Myers Squibb (+$4.5 billion), and Gilead Sciences (+$4.2 billion).
The Information Technology sector enjoyed a 7.4% rise in cash balances in Q3. IT had the highest cash balance (ex-Financials) at $512.3 billion. Of interest, Oracle was the largest contributor to the increase in cash for this sector, as the company recorded a $12 billion dollar increase in cash balances compared to the year-ago quarter. Oracle $51.6 billion cash balance is the fifth highest of all the firms in the S&P 500. Other companies in the sector that saw major growth in cash included Yahoo! Finance with an extra $9.4 billion and Microsoft with an additional $8.5 billion.
The Telecom Services sector witnessed the largest decrease in cash balances for Q3 at -74%. Telecom Services also had the lowest cash balance (ex-Financials) at $15.4 billion. Verizon was the largest contributor to the decline in cash for the sector with a $49.5 billion decrease in cash relative to the year-ago quarter.
Details on capital expenditures
The FactSet report also highlighted that capital expenditures for the S&P 500 (ex-Financials) saw steady growth to 5.7% in the third quarter, consistent with the year-over-year first and second quarter growth rates of 6.0% and 4.9%. Eight sectors reported a year over year increase in capex, led by the Information Technology sector. The only sector with a decline in capex in the third quarter was Telecom Services.
The Information Technology sector reported the highest growth in CapEx at 21.4%. Apple was the biggest factor in the increase in capex growth for the sector. The company spent $3.83 billion on capex in the third quarter this year, compared to $1.95 billion in Q3 2013. Micron Technology also upped the capex ante, spending $1.14 billion in third quarter 2014 compared to $280 million in Q3 2013.
The Materials sector saw the second highest increase in capex spending at 9.3%. Three companies upped capex spending by over $200 million in this sector in the third quarter: Dow Chemical (+$364 million), CF Industries (+$357 million), and Freeport-McMoRan Copper ($208 million).
The Telecom Services sector was the only sector where capex was down (-7.5%). AT&T was the biggest factor in the decline, as the firm decreased capex spending by $733 million less in Q3 2014 compared to Q3 2013.
Based on guidance from the firms, FactSet reports that S&P 500 (ex-Financials) capex growth is projected to drop off to just 1.0% over the next 12 months.