It’s been one of the most overlooked aspects of earnings season… I’m not talking about the market’s strong gains or the recent robust employment growth. I’m talking about stock buyback announcements. I’ve counted more than 30 companies that have announced plans to buy back at least $1 billion in stock since late October. And such big buybacks are often a harbinger of stock price gains, as analysts look to boost their EPS (earnings per share) forecasts that result from smaller share counts.

I decided to take a final look at the companies buying back big chunks of stock, specifically, the biggest stock buybacks in February. I narrowed my focus to companies with plans to buy at least $900 million in stock, and in each case, the buyback must represent at least 10% of shares outstanding. That percentage tells you precisely how much EPS can be boosted — all other things being equal.

It’s telling that major retailers account for some of the biggest current buybacks. These companies continue to throw off oodles of cash, yet their shares are lagging the broader market while retail spending remains weak. Buying back stock now — before consumer spending picks up — may turn out to be a great move.

Here are two names from the table above that look quite appealing simply on the fundamentals (the buyback plans are purely icing on the cake).

Kohl’s (NYSE: KSS)
I’ve always been a fan of this department store operator. Not because its merchandising touch is always on the mark, allowing Kohl’s to perennially take market share from less savvy rivals. Instead, management has always run a really impressive operation in terms of financial performance: Ever-improving product sourcing has pushed costs down and allowed gross margins to rise for seven straight years, return on equity (ROE) routinely hovers around 15%, revenue per employee hits new highs every year, and Kohl’s now sports a robust $2.3 billion in cash.

That’s enabled management to offer up a dividend for the first time in the company’s history, while also committing to a massive $3.5 billion stock buyback (to be completed in the next three years), which could reduce the share count by about 20%. Despite that, shares remain some 30% below levels seen three years ago, as investors focus on the still-weak consumer. Yet Kohl’s is still managing to bring in customer traffic, posting a 5% jump in same-store sales in February. Further growth is expected to come as the result of the company’s website, which saw a 50% jump in traffic this past holiday season compared with a year ago, and an even deeper push into private-label apparel in 2011.

Shares trade for just 12 times projected (January) 2012 consensus profit forecasts, though the new buyback plans could help Kohl’s stay ahead of the consensus forecast. This isn’t a home run stock that’s about to zoom ahead, but rather a slow and steady runner that is likely to re-visit its 2007 highs of $75 to $80 in the next year or two. That works out to be a nearly 40% gain.

Amdocs (NYSE: DOX)
Cable and phone companies are faced with a bewildering array of technology challenges. They have to develop the best platform to best manage internal resources, the best methods of interacting with customers and they need to strive to avoid any major glitches that could disrupt operations. Amdocs’ suite of software services provides one of the industry’s strongest platforms to manage these needs, helping the company to march toward $3 billion in annual sales. Free cash flow has risen every year, to a recent $600 million.

Trouble is, pushing past the $3 billion sales mark has been a real challenge. As a result, new management has taken charge and laid out plans to generate more organic growth. “New CEO Eli Gelman wasted no time in making some difficult (but in our opinion necessary) decisions,” note analysts at UBS. UBS came away impressed from a meeting with analysts late February that outlined a more aggressive strategy, especially in emerging markets, which currently represent Amdocs’ fastest growing segment.

Goldman Sachs’ analysts are also impressed by management’s new approach: “There are significant secular pockets of growth in the explosion of wireless, connected devices, and international expansion… (and) we believe that DOX is taking the right steps in configuring its model around these long-term drivers.” It could take a while, but analysts increasingly see Amdcos as better-positioned to retain or even take market share from rivals such as Oracle (Nasdaq: ORCL).

In the interim, Amdocs is putting its $1.4 billion in cash to use, having announced a plan a few weeks ago to re-acquire roughly 20% of shares outstanding. Near-term expectations are muted: Amdocs is expected to boost sales just 5% this year and next, with per-share profits staying flat in fiscal (September) 2011 and rising roughly 10% in fiscal 2012. Yet, the current new growth plans are expected to boost sales and profits in subsequent years, before even accounting for the benefits of the major buyback.

Action to Take –> Buying back an ample percentage of the share count while shares trade for a below-market multiple is often a recipe for success. Kohl’s and Amdocs are letting investors know that their cash-rich balance sheets will be a strategic weapon to help move the share price higher. As a result, either one of these stocks is a worthy buy-candidate.

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