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Cash balances flat for Q3

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By FactSet Insight  |  December 24, 2014

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Cash & short-term investment balances (“cash”) in the S&P 500 (ex-Financials) settled at a balance of $1.37 trillion at the end of Q3, reflecting no year-over-year growth (0%). In terms of year-over-year growth in cash balances at the sector level, five sectors witnessed an increase in cash balances, led by the Health Care and Information Technology sectors. Four sectors saw a drop in cash balances, led by the Telecom Services sector.

The Health Care sector recorded the highest jump in cash balances for Q3 at 10.9%. This sector had the second highest cash balance (ex-Financials) at $217.3 billion. Four companies in this sector saw cash balances increase by $4 billion or more: 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 saw the second largest rise in cash balances for Q3 at 7.4%. This sector had the highest cash balance (ex-Financials) at $512.3 billion. 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 now has the 5th largest cash balance ($51.6 billion) of all the companies in the index. Other companies in the sector that recorded substantial increase in cash included Yahoo! Finance (+$9.4 billion) and Microsoft (+$8.5 billion).

On the other hand, the Telecom Services sector had the largest decrease in cash balances for Q3 at -74%. This sector 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. The company recorded a $49.5 billion drop in cash balances compared to the year-ago quarter.

Capital expenditures (“CapEx”) for the S&P 500 (ex-Financials) grew to 5.7% in Q3, which was consistent with the year-over-year growth rates report in Q2 (4.9%) and Q1 (6.0%). In terms of year-over-year growth in CapEx at the sector level, eight sectors reported an increase in CapEx, led by the Information Technology sector. The only sector that reported a decline in CapEx in Q3 was the Telecom Services sector.

The Information Technology sector reported the highest growth in CapEx at 21.4%. Apple was the main driver of the increase in CapEx growth for the sector. The company spent $3.83 billion on CapEx in Q3 2014, compared to $1.95 billion on Q3 2013. Micron Technology was also a substantial contributor to the rise in CapEx, as the company spent $1.14 billion in Q3 2014 relative to $280 million in Q3 2013.

The Materials sector recorded the second highest growth in CapEx at 9.3%. Three companies increased CapEx by more than $200 million in this sector in Q3: Dow Chemical (+$364 million), CF Industries (+$357 million), and Freeport-McMoRan Copper ($208 million).

The Consumer Discretionary sector witnessed the third highest growth in CapEx at 7.9%. Companies in the Automobiles (General Motors, Ford) and Media (Time Warner Cable, Comcast) industries saw some of the largest year-over-year increases in CapEx, along with Amazon.com.

On the other hand, the Telecom Services sector was the only sector to report a decrease in CapEx (-7.5%). AT&T was the largest contributor to the year-over-year decline, as the company spent $733 million less in Q3 2014 relative to Q3 2013.

Going forward, S&P 500 (ex-Financials) CapEx growth is expected to fall to 1.0% over the next 12 months. Six sectors are projected to report growth in CapEx, but none are expected to see double-digit growth. The Information Technology sector is expected to report the highest growth at 7.4%. Three sector are predicted to report a year-over-year drop in CapEx, led by the Energy (-1.7%) and Utilities (-1.7%) sectors.

Shareholder distributions in the form of dividends and net repurchase of stock increased 11.9% year-over-year to $190.8 billion in Q3. The marked the 7th time in the past 8 quarters that year-over-year shareholder distributions grew by double-digits. While the Materials sector reported the highest growth in distributions (124%), the Information Technology sector paid out the largest aggregate sum ($52.2 billion). 

Read more about the S&P 500 companies' trends in corporate cash balanaces in this quarter's edition of FactSet Cash & Investment Quarterly. Visit www.factset.com/cashinvestment to launch the report now.

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