Companies prepare stock buyback bonuses with increased profits

The Crypto Daily - Movers and Shakers - May 5, 2021

Big tech groups whose businesses have accelerated under the pandemic have been among the companies expanding buyback authorisations most aggressively. Apple and Alphabet announced an additional $90bn and $50bn in repurchase plans, respectively, last month. “Things are getting better, and companies have a little bit better cash flow,” he said. “Before, you had a thousand scenarios, and now maybe you have only a hundred, so it’s a little bit easier to think.” The planning for buybacks is widespread across industries, however. “We did suspend the buyback last year because of uncertainty,” James Saccaro, chief financial officer of healthcare company Baxter, said at a conference on Tuesday, but the company returned to the market in the fourth quarter last year. “We like doing it.”

The pace in Europe appears to be lagging the US, but Société Générale predicted that buybacks on that side of the Atlantic could eclipse their pre-pandemic levels next year by some 25 per cent. In what its analysts dubbed a “buyback bonanza”, Goldman projected shares repurchases by US companies would increase 35 per cent this year from 2020.

Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said companies were becoming more confident in their outlook, even if uncertainties remain. The figure foreshadows a big acceleration in the pace of buybacks, which have already begun to rebound from their nadir last year, when the pandemic encouraged companies to hoard cash in case of a long downturn.

Current spending on buybacks is still trailing behind last year’s levels, according to data by S&P Global. As of last week, with more than 80 per cent of the S&P 500 having reported earnings, companies said they had, on aggregate, bought back $140bn in shares in the first quarter. That is more than in each of the previous three quarters, but less than the $199bn in last year’s first quarter. Jamie Dimon, chief executive of JPMorgan, whose board gave the green light to a $30bn buyback programme in December, said last month his bank was “buying back stock because our cup runneth over”.

Recommended Analysts say banks are also eager to return to the practice at scale as the Federal Reserve loosens pandemic-era restrictions on returning cash to shareholders.

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