Q2 Cash Balance Hits Second Largest Total in a Decade by FactSet

The S&P 500 (Ex-Financials) cash and short-term investments balance (“cash”) amounted to $1.45 trillion at the end of the second quarter, which marked a 1.1% increase from the year-ago quarter, but a 0.2% decline from Q1. The balance in Q2 represented the second largest cash total in at least 10 years (after Q1 2016). Although the aggregate cash balance for the index grew year-over-year, it has been the top 20 companies primarily driving this growth. As of the end of the second quarter, the top 20 companies in the S&P 500 (Ex-Financials) ranked by cash and short-term investments represented 50.9% of the aggregate cash for the index. This marked the largest percentage in at least 10 years. The top 20 cash percentage was an increase from the percentage in the year-ago quarter (49.4%) as well as the first quarter (50.5%). Related: Cash Balance Grows 5.7% Year-Over-Year At the sector level, the Information Technology group maintained the largest cash balance ($624.6 billion) at the end of Q2. The sector’s cash total made up 43% of the aggregate amount for the index, which was a jump from the 38% in the year-ago quarter. The Information Technology sector saw its balance grow 15% year-over-year. Six of the GICS sectors increased their cash totals on a year-over-year basis (Consumer Discretionary, Consumer Staples, Information Technology, Materials, Real Estate, and Utilities). The Industrials and Energy groups saw the largest declines in their cash balances of any sector during Q2 (22% and 9%, respectively).
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At the company level, Microsoft and Alphabet topped the list of companies ranked by quarterly cash and short-term investments. Microsoft had a cash balance of $113.2 billion at the end of the quarter, while Alphabet had a balance of $78.5 billion. The top five companies on this list were all part of the Information Technology sector, which is not uncommon. If long-term investments are included in the company’s cash total, then Apple and Microsoft will top the list with balances of $231.5 billion and $123.7 billion, respectively. Keep in mind that Microsoft announced last week that it plans to buy back as much as $40 billion worth of stock and raise its dividend to $0.39.

Q2 Capital Expenditures Decline 7.9% Year-Over-Year

Fixed capital expenditures in the second quarter amounted to $144.7 billion, which represented a 7.9% decline from the year-ago quarter, but a 2.1% uptick from Q1. The first quarter was the smallest quarterly CapEx total since 2013. On a TTM basis ending in Q2, CapEx for the S&P 500 (Ex Financials) amounted to $608.3 billion, which represented an 8.7% decline from the same time period a year ago. The TTM amount marked the smallest total since Q3 2012. Additionally, the trailing 12-month CapEx to sales ratio was 6.7%, which represented a 6.5% decline from the same time period a year ago. This marked the lowest ratio for the index since Q3 2012. Despite the overall decline, six of the GICS sectors increased their quarterly fixed capital expenditures on a year-over-year basis, with the Information Technology, Utilities, and Consumer Discretionary groups doing so at a double-digit clip (Consumer Discretionary, Health Care, Industrials, Information Technology, Telecom, and Utilities). The Information Technology sector led all sectors in year-over-year growth in fixed CapEx, posting a growth rate of 13.2%. At the company level, Microsoft, Apple, Intel, and Facebook each ramped up their CapEx from the year-ago quarter. Micron Technology led the increase in year-over-year CapEx for the sector spending $1.7 billion in the second quarter, compared to $700 million in Q2 2015.

Energy CapEx Falls for Sixth Consecutive Quarter

On the other end of the spectrum, the Energy sector saw the largest year-over-year decline in quarterly CapEx during the second quarter. Quarterly capital expenditures amounted to $23.2 billion, which represented a 40.4% decrease from the year-ago quarter. The quarter marked the sixth consecutive quarter that Energy CapEx saw a year-over-year decline. In the trailing 12 months ending in Q2, aggregate capital expenditures in the Energy sector marked the smallest TTM amount since the period ending in Q2 2010. At the company level, some of largest year-over-year CapEx cuts in the Energy sector came from Chevron, Exxon Mobil, and ConocoPhillips. Chevron and Exxon decreased their spending on fixed capital expenditures year-over-year by nearly $3 billion each, while ConocoPhillips cut CapEx by over $1 billion. Related: Oil Prices, Energy Earnings Expected to Rise in 2017 Moving forward, analysts are forecasting that capital expenditures in the Energy sector will decline by about 9% over the next 12 months on a year-over-year basis. However, much of that decline is coming from projections for 2016. Looking at CapEx spending in the sector for 2017, analysts estimate that Energy companies will see a 1.5% growth rate year-over-year. Oil prices could play a large role in whether or not these projections are met. Currently, analysts expect crude oil prices to be around $49 at the end of Q4, and to rise near the $53.50 mark at the end of 2017. Read more about S&P 500 companies’ trends in corporate cash balances in this quarter’s edition of FactSet Cash & Investment Quarterly. Visit www.factset.com/cashinvestment to launch the latest report. 

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