Aug 28, 2020 - Economy & Business

Stock buybacks stage a comeback

Source: S&P Dow Jones Indices; Chart: Naema Ahmed/Axios
Source: S&P Dow Jones Indices; Chart: Naema Ahmed/Axios

A slew of companies put stock buyback plans on ice at the onset of the pandemic. Now some of them are beginning put share repurchases back on the table.

Why it matters: The ramping up of stock buybacks is a sign that swaths of corporate America feel confident enough to return to some sense of normalcy, even as millions of Americans are still dealing with the harsh fallout from the coronavirus-hit economy.

The latest: Intel said last week it would resume the previously announced $20 billion stock buyback plan that it put on ice when the pandemic hit. The company said "repurchases are prudent at this time, given the strength of the company's balance sheet," per its SEC filing.

  • Auto parts retailer O'Reilly Automotive restarted its share repurchase program in May after evaluating "business conditions and liquidity," executives said on an analyst call last month.
  • Agilent, which manufactures lab equipment, also said it would restart its regular pattern of buybacks. "We felt for some time that [fiscal] Q3 ... would be the toughest quarter for us for the year. We’re through that now," CEO Mike McMullen said to analysts.
  • A Barclays analyst predicts Honeywell is among manufacturers that will likely resume or ramp up stock buyback programs "as early as the current quarter," Bloomberg notes.

Yes, but: "The companies that are doing buybacks now have the money," Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, tells Axios.

  • Companies in industries completely battered by the coronavirus — like airlines — are still holding off on buying back stock, Silverblatt notes.
  • Others that are sitting on fatter cash piles may be holding off in case business takes another turn for the worse.

By the numbers: S&P 500 companies spent nearly $86 billion dollars on stock buybacks so far this quarter, by Silverblatt's count — a marked slowdown from the $165 billion companies spent on repurchases this time last year.

The bottom line: Companies halted stock buybacks when the pandemic presented unprecedented uncertainty. The return of buybacks mean some think that era of uncertainty is over, even though the pandemic still poses great challenges to the U.S. economy.

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