Apple Inc. (NASAQ:AAPL) shares shot upward today after the company announced a massive increase in its share repurchase program, which will be funded by an enormous bond offering. The news is enough to support the stock in a time when it has gotten hammered because of weak data points in the iPhone maker’s supply chain—a problem that continued into January, new data shows.
Refreshed warning about Apple’s March quarter
Now that Apple Inc. (NASAQ:AAPL) has put the troublesome December quarter behind it, the next big barrier is the March quarter, and Stifel analyst Aaron Rakers doesn’t see any relief for the supply chain woes that have plagued the company for months. In his Feb. 15 report on the January results from suppliers Hon Hai/ Foxconn and Pegatron, he found that both show continued declines in sales.
Foxconn recorded NT$337.6 billion in sales last month, representing a year over year decline of 15% and a month over month decline of 18%. The month over month decline was much better than the 36% decline seen in January 2014 and the 23% decline recorded a year ago. The 18% decline comes on the heels of December’s 21% decline, compared to the 7% increase in December 2013 and the flat result found in 2014.
Pegatron saw a 14% year over year decline and a 12% month over month decline in January sales, which came on the heels of December’s 5% decline in December. In January 2014, the second biggest iPhone manufacturer saw a 3.5% increase, while in 2015, the company saw a month over month increase of 3%.
Not so bad on a combined basis
Rakers said when looking at combined month over month sales, together, Pegatron and Foxconn saw a 16% decline in January after an 18% decline in December. In January 2014, however, the combined decline was 30%, while in 2015, sales fell 18%, making this year’s combined sales decline better. It’s also in line with the average month over month decline, the Stifel analyst found.
He added that although these numbers reflect only a single month of data, over the last five years, January has, on average, accounted for about 36.7% of total combined revenue for the January quarter. As a result, he’s estimating a 7% year over year decline in the current quarter.
AAPL to raise up to $20 billion in bond sale
While investors have been steadily punishing Apple Inc. (NASAQ:AAPL) for supply chain data points like these, the company has been able to boost its stock price with an increase to its stock buyback program. The iPhone maker was one of a handful of major companies to announce a new bond offering to fund the program. Apple’s offering is expected to do well, reports CNBC, as the bonds are considered to be cheap for the company’s name. Meanwhile the Cupertino, Calif. tech giant continues to sit on $187 billion in cash that it won’t repatriate because of the high U.S. corporate tax rate.
The iPhone maker revealed the 10-part bond offering in a filing with the U.S. Securities and Exchange Commission. Although the amount of funds wasn’t given in the filing, Bloomberg said its sources expect a multi-billion dollar offering with bonds of up to 30-year terms. The 30-year bonds are expected to have a yield of 21.5 percentage points higher than U.S. Treasuries with similar maturities, said the media outlet. This represents a premium of 25 basis points over the average bond yield for those with similar ratings and maturities, according to data from Bank of America Merrill Lynch Indexes.
In addition to paying for more share repurchases, the proceeds from the offering will be used for acquisitions, debt repayment and general corporate purchases, said the media outlet.
Shares of Apple Inc. (NASAQ:AAPL) climbed by as much as 1.72% to $95.61 during regular trading hours today.