US Firm Share Buybacks Drop In Second Quarter: FactSet

US Firm Share Buybacks Drop In Second Quarter: FactSet

It looks like the many years of massive corporate stock buybacks that has helped support the multi-year equity market rally may finally be coming to an end.

As noted in a September 21st report from FactSet Insight, firms in the S&P 500 made $134.4 billion in share repurchases in the second quarter of this year. Of note, this was a 6.9% decline in buybacks compared to the first quarter.

Six out of eight S&P 500 sectors experienced a sequential (quarter-over-quarter) decrease in share buybacks at the end of the second quarter (ex the Telecom and Utilities sectors, which averaged under $2 billion in quarterly buybacks since 2005). FactSet Analysts Andrew Birstingl also points out the only sectors that enjoyed positive quarter over quarter growth were Consumer Discretionary and Materials.

This mining and metals fund is having a strong year so far

Cubic Corporation Chris Hohn favorite hedge fundsThe Delbrook Resources Opportunities Master Fund was up 9.2% for May, bringing its year-to-date return to 33%. Q1 2021 hedge fund letters, conferences and more Dellbrook is an equity long/ short fund that focuses exclusively on the metals and mining sector. It invests mainly in public companies focused on precious, base, energy and industrial metals Read More

More on 2Q decline in share buybacks

Pfizer, who has been undertaking large buybacks for years, saw the largest quarter-over-quarter drop off of any S&P 500 company in the second quarter (-$6.2 billion). In the first three months of the year, Pfizer bought $6.1 billion worth of shares through its shareholder distribution program and more though its new accelerated share repurchase program. The pharma major only bought $2.8 million worth of shares in the second quarter as the firm apparently already hit its share repurchase target for the year.

Share Buybacks

Verizon was also a major contributor to the decrease in buybacks in 2Q, as it saw a $3.4 billion drop off from the first quarter. Other firms that saw a decrease of more than $1 billion in share buybacks included United Technologies (-$2.6 billion), Gilead Sciences (-$2.3 billion), Illinois Tool Works (-$1.4 billion), Johnson & Johnson (-$1.3 billion), Abbott Laboratories (-$1.3 billion), eBay (-$1.2 billion) and Keurig Green Mountain (-$1 billion).

Birstingl also highlights that there was less participation in buybacks by S&P 500 firms overall this quarter. The total number of firms buying back shares slipped from 390 in first quarter to 378 in the second quarter. Of note, the average number of firms making share buybacks in a given quarter since July 2009 is 357, so 378 is still above average.

Share Buybacks

Breakdown of S&P 500 sector trends

The Information Technology sector made $35.9 billion in share buybacks in the second quarter, the most of any sector. It was twelfth consecutive quarter that the IT sector had the highest dollar amount of buybacks. Apple led the way in the sector. Back in April, Apple announced that it had expanded its capital return program to $200 billion, and the new program included boosting its share repurchase authorization from $90 billion to $140 billion. Apple’s share repurchases in the second quarter totaled $10 billion, an 18.2% advance relative to the first quarter.

The Financials sector led all sectors in terms of year-over-year growth in share buybacks at +29.8%. The Industrials sector was in second place with a growth rate of 17.1%. The Financials, Industrials and Consumer Discretionary sectors were the only major buyback sectors to see year-over-year growth of greater than 10% in the second quarter.

Share Buybacks

Insurer American International Group and megabank Citigroup drove most of the growth in the Financials sector. Buybacks for AIG totaled to $2.3 billion in the second quarter, a $2.1 billion boost from the year ago quarter. Earlier this year, AIG increased its dividend and authorized the repurchase of $5 billion more in shares. That upped the total remaining share repurchase authorization to $6.3 billion.

Citigroup received approval from the Fed back in March to buy back up to $7.8 billion over 15 months starting in the second quarter of  2015. Citi bought $1.6 billion worth of shares in the second quarter, $1.3 billion more than Q2 last year. Birstingl also points out that Bank of America and Bank of New York Mellon also made significant contributions to year-over-year buyback growth at +$539.9 million and +$403.5 million, respectively.

Share Buybacks

Lockheed Martin and American Airlines were the main drivers for share buybacks in the Industrials sector at +$813.3 million and +$752.7 million, respectively. Delta Airlines (+$697.5 million), UPS (+$609.5 million) and Boeing (+$448.8 million) all contributed to the positive trend as well.

No posts to display