S&P/ASX 200 Index (ASX: XJO) stock Reece Ltd (ASX: REH) is charging higher today.
Shares in the plumbing parts company closed yesterday trading for $12.24. In early morning trade on Thursday, shares are changing hands for $12.60 apiece, up 2.9%.
For some context, the ASX 200 is up 0.2% at this same time.
Despite today's boost – and the 18.7% gains achieved since last Wednesday's close – the Reece share price remains down a sharp 50.8% since this time last year.
Those losses will have only been modestly dampened by the 18.4 cents per share in fully franked dividends the company paid eligible stockholders over this period. Reece shares currently trade at a fully franked 1.46% trailing dividend yield.
Now, here's what's happening today.
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ASX 200 stock increases share buyback to $400 million
In October, Reece completed a $365 million off-market share buyback, with the company paying $13 per share. The buyback was funded with both cash and debt.
Today, the ASX 200 stock announced an on-market share buyback of up to $35 million. Management noted this is now at the upper limit of the buyback the company had previously announced.
The new $35 million buyback will also be funded via a mix of on-hand cash and existing debt facilities.
Commenting on the new buyback, Reece chair and CEO Peter Wilson said, "We have a well-defined capital allocation framework and continue to take a long-term approach to shareholder value creation."
Wilson added, "We remain committed to maintaining a strong balance sheet with a conservative leverage ratio to fund future growth."
The ASX 200 stock expects the on-market buyback to commence on or after 12 December. It will be conducted in the ordinary course of trading and could run for up to 12 months.
What else has been impacting Reece shares?
Reece shares have enjoyed a strong run since the company reported its September quarter results on 21 November.
Highlights included an 8% year-on-year increase in sales revenue for the three months to $2.41 billion. (Sales revenue was up 6% on a constant currency basis.)
"Sales were supported by network expansion over the past 12 months," Wilson said.
Indeed, over the quarter, the ASX 200 stock added 10 new branches in the United States and five new branches in Australia and New Zealand.
But with costs rising, earnings came under pressure.
Reece reported an 8% year-on-year decline in earnings before interest, taxes, depreciation and amortisation (EBITDA) to $222 million.
"Costs remain elevated driven by network growth, ongoing investment in core capabilities and the impact of labour cost inflation in competitive markets, especially the US," Wilson said.
