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Cash Balances Hit New Record High

Cash & short-term investments (“cash”) in the S&P 500 (ex-Financials) settled at a balance of $1.43 trillion at the end of Q4 (January), which marked a record-high balance for the index. The previous record balance was $1.41 billion, set in Q4 2013.

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In terms of year-over-year growth in cash balances at the sector level, six sectors witnessed an increase in cash balances, led by the Consumer Staples and Health Care sectors. Four sectors saw a drop in cash balances, led by the Telecom Services sector.

The Consumer Staples sector saw the largest rise in cash balances for Q4 at 18.7%. This sector had the fifth highest cash balance (ex-Financials) at $112.8 billion at the end of the quarter. Walgreens Boots Alliance was the largest contributor to the increase in cash for this sector. The newly combined company (Walgreens and Boots Alliance) recorded an $11.9 billion increase in cash relative to the year-ago quarter, when Walgreens was a stand-alone company. Other companies in the sector that recorded substantial increases in cash included Sysco Corporation (+$4.5 billion) and Procter & Gamble (+$3.7 billion).

The Health Care sector recorded the second highest jump in cash balances for Q4 at 18.0%. This sector had the second highest cash balance (ex-Financials) at $237.1 billion at the end of the quarter. Gilead Sciences was the largest contributor to the increase in cash for this sector, as the company recorded an $8.0 billion increase in cash relative to the year-ago quarter. Other companies in the sector that recorded substantial increases in cash included Amgen Inc. (+$7.6 billion) and Becton, Dickinson and Company (+$6.3 billion).

On the other hand, the Telecom Services sector had the largest decrease in cash balances for Q4 at -62%. This sector also had the lowest cash balance (ex-Financials) at $23.1 billion. Verizon was the largest contributor to the decline in cash for the sector, as the company recorded a $43.0 billion drop in cash balances compared to the year-ago quarter.

At the company level (ex-Financials), Microsoft ($90.2 billion) and General Electric ($90.2 billion) had the largest cash balances at the end of the fourth quarter. Five of the 10 companies with the highest cash balances at the end of the quarter were in the Information Technology sector.

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Capital Expenditures Projected to Decline by 3.4% over Next 12 Months

On a forward 12-month basis (as of January 31), capital expenditures (“CapEx”) for companies in the S&P 500 (ex-Financials) are expected to fall by 3.4%. Four sectors are projected to report a year-over-year decline in CapEx during this time, led by the Energy sector (-13.5%). The other three sectors predicted to see year-over-year decreases in CapEx during this period are the Telecom Services (-4.5%), Utilities (-2.5%), and Materials (-1.4%) sectors. On the other hand, six sectors are projected to report year-over-year increases in CapEx, led by the Information Technology (+6.3%) and Health Care (+5.2%) sectors.

On a quarterly basis, capital expenditures (“CapEx”) for the S&P 500 (ex-Financials) grew by 6.0% year-over-year to $183.9 billion in Q4 2015.

At the sector level, eight sectors reported an increase in CapEx, led by the Energy, Consumer Discretionary, and Information Technology sectors.

Despite falling oil prices, the Energy sector recorded the largest growth in CapEx at 15.8%. This sector also spent the largest dollar amount on CapEx of all 10 sectors in the index at $63.8 billion. At the company level, Southwestern Energy Company was the main driver of the increase in CapEx spending for the sector, as the company reported a 971.8% year-over-year increase in CapEx for the quarter. Southwestern Energy spent $5.628 billion on CapEx in Q4 2015, compared to $525 million in the year-ago quarter.

The Consumer Discretionary sector witnessed the second highest growth in CapEx at 11.3%. This sector spent the second largest dollar amount on CapEx in Q4 2015 at $23.4 billion. At the company level, General Motors was a substantial contributor to the increase in CapEx spending for the sector, as the company reported a 56.5% year-over-year increase in CapEx (to $3.6 billion from $2.3 billion) for the quarter.

The Information Technology sector reported the third highest growth in CapEx at 10.4%. This sector spent the fourth largest dollar amount on CapEx for the quarter at $17.9 billion. At the company level, Google and Apple were the key drivers of the increase in CapEx for the sector. Apple reported a 59.7% year-over-year increase in CapEx (to $3.2 billion from $2.0 billion), while Google reported a 57.5% year-over-year increase in CapEx (to $3.6 billion from $2.3 billion).

At the company level, Chevron ($10.0 billion) and Exxon Mobil ($8.9 billion) were the largest spenders on CapEx during the fourth quarter. Four of the 10 companies that spent the largest amounts on CapEx during the quarter were in the Energy sector.

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Shareholder Distribution Grows 1.7% in Q4

Shareholder distributions in the form of dividends and net repurchase of stock increased by 1.7% year-over-year to $175.4 billion in Q4. The marked the just the second time in the past nine quarters that year-over-year shareholder distributions did not grow by double-digits.

At the sector level, the Consumer Discretionary sector reported the highest growth in distributions (23.9%), while the Information Technology sector paid out the largest aggregate sum ($52.2 billion).

At the company level, Apple ($7.8 billion) and Exxon Mobil ($6.2 billion) were the largest spenders on shareholder distributions as of the end of Q4.

Net Debt Issuance: Third Highest in Past 10 Years

Net debt issued is the measure of aggregate, net funds from issuance (reduction) of debt and increases (decreases) in capitalized lease obligations. It also includes the increases in debt from acquisitions and the decreases in debt from the conversion of debentures into common stock.

In Q4 2015, companies issued $89.4 billion in net debt. This marked the third highest total for a quarter over the past 10 years, trailing only Q4 2008 ($98.2 billion) and Q3 2013 ($95.2 billion). A number of sectors issued net debt in Q4 2014 that ran well above their 10-year averages for a quarter, including the Energy ($23.6 billion vs $4.5 billion), Consumer Discretionary ($20.8 billion vs. $3.4 billion), Telecom Services ($11.4 billion vs. $1.1 billion) and industrials ($8.7 billion vs. $607 million) sectors.

Cash as a percentage of debt was 39.4% at the end of Q4. While this percentage was below the percentage one year-ago (42.3%), it was slightly above the percentage recorded in the previous quarter (39.3%) and also above the 10-year average (36.1%) for the S&P 500 (ex-Financials).

FactSet Cash & Investment Quarterly Report

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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Senior Earnings Analyst
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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