The January 30th Goldman Sachs US Weekly Kickstart highlights that the firms in the S&P 500 are projected to spend around $2.1 trillion next year. The report also takes a closer look at how much will be spent on capex, stock buybacks and dividends.

Of note, although capex spending is anticipated to decline overall, that is only because capex in the battered energy sector is expected to be down by 25% next year and the energy sector typically represents around a third of total S&P 500 capex spending.

Goldman Sachs analysts David. J. Kostin and colleagues “Buybacks will be less affected and should grow by 12%. Early repurchase activity so far this year has been strong, and should increase as reporting season black-out periods end. We see little downside risk to dividends in 2015 and recommend our Total Cash Return basket (Bloomberg: GSTHCASH) of S&P 500 firms with the largest combined dividends and buybacks.”

Revised S&P 500 capex projections for 2015

S&P 500 Earnings

The report notes that Goldman Sach’s forecast S&P 500 capex growth in 2015 has been reduced to -3% from +6%. Given the price of Brent crude has dropped by more than 40% in the last few months, GS is projecting that total energy capex will drop by 25% in 2015. Taking in to account the sector represents 33% of S&P 500 capex that will pull total S&P 500 capex growth down into negative territory.

Kostin et al note that ex-energy, the outlook for U.S. capex remains quite robust.” They note: Our Current Activity Indicator (a real-time proxy for GDP growth) suggests the economy is expanding at a solidly above-trend pace, and most economists expect  above-trend growth to continue into 2016. Capacity utilization has climbed back to its 40-year average of 80%, the highest level since the recession. Policy uncertainty has tumbled and lending conditions are easy.”

S&P 500 Earnings

S&P 500 firm spending break down for 2015

The GS report also highlights a new forecast for S&P 500 gross buybacks in 2015 of $604 billion, reflecting 12% annual growth (compared with 18% previously) and representing 3% of S&P 500 market cap. The GS analysts also expect that capex will remain the largest use of S&P 500 cash in 2015 at around 32% of total cash spent. Of note, capex has been the largest single use of cash every year for the last 25 years except for 2006 and 2007, when buybacks were higher. They project S&P 500 capex of $676 billion and buybacks totaling $604 billion in 2015. Kostin and colleagues also note they anticipate dividends to be up by around 9% in 2015.

S&P 500 Earnings