4

I was curious if a company typically announces stock splits during quarterly earnings releases.

I'm particularly curious about Apple, but in general wonder if there is a common practice for this.

Improve this question

1 Answer 1

Reset to default
3

In 2005, Apple announced a split on Feb 11...

CUPERTINO, California — February 11, 2005 — Apple® announced today that its Board of Directors has approved a two-for-one split of the Company’s common stock and a proportional increase in the number of Apple common shares authorized from 900 million to 1.8 billion. Each shareholder of record at the close of business on February 18, 2005 will receive one additional share for every outstanding share held on the record date, and trading will begin on a split-adjusted basis on February 28, 2005.

...one month after announcing earnings.

CUPERTINO, California—January 12, 2005—Apple® today announced financial results for its fiscal 2005 first quarter ended December 25, 2004. For the quarter, the Company posted a net profit of $295 million, or $.70 per diluted share. These results compare to a net profit of $63 million, or $.17 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.49 billion, up 74 percent from the year-ago quarter. Gross margin was 28.5 percent, up from 26.7 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter’s revenue.

I wouldn't expect Apple to offer another split, as it's become somewhat fashionable among tech companies to have high stock prices (see GOOG or NFLX or even BRK-A/BRK-B). Additionally, as a split does nothing to the underlying value of the company, it shouldn't affect your decision to purchase AAPL. (That said, it may change the perception of a stock as "cheap" or "expensive" per human psychology).

So, to answer your question: companies will usually announce a stock split after releasing their financial results for the preceding fiscal year. Regardless of results, though, splits happen when the board decides it is advantageous to the company to split its stocks.

Improve this answer
4
  • Thanks Daniel. Unfortunately most people think Apple is expensive, when their P/E is rock bottom (about 11 when you consider the cash that is on hand). This P/E seems even more extreme when you look at Apples y-o-y earnings growth rates over the last 8 quarters, i.e. last quarter was 125% y-o-y, and 8 quarters ago it was 45% y-o-y. Between those quarters has been a steady increase in growth (i.e. a linear increase in growth rate). Do you know if there is a general practice among when companies do their splits -- i.e. are earnings releases the most common?
    – Ray K
    Commented Oct 11, 2011 at 1:47
  • I don't know - other than splits are generally announced a month or so in advance. I don't see Apple taking off dramatically if a split is announced - maybe a few % points, but I (hope) folks aren't that irrational.
    – Dan Carroll
    Commented Oct 11, 2011 at 4:03
  • 3
    @RayK - Splits happen when the board decides it is advantageous to the company to split its stocks. Unless they feel that the company is severely undervalued I can not foresee any reason that Apple would split.
    – user4127
    Commented Oct 11, 2011 at 15:40
  • 1
    @RayK, I don't see the connection to P/E. That's price-per-share divided by earnings-per-share; splitting the shares has no effect.
    – poolie
    Commented Feb 27, 2012 at 3:07

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .