AP

Stock buybacks show no signs of a slowdown so far this year

Mar 23, 2022, 8:19 PM | Updated: Mar 24, 2022, 8:59 am

FILE - Pedestrians walk past the New York Stock Exchange in New York's Financial District, Tuesday,...

FILE - Pedestrians walk past the New York Stock Exchange in New York's Financial District, Tuesday, March 23, 2021. Companies in the S&P 500 bought a record amount of their own stock last year and don't show any signs of slowing down. Flush with cash from solid earnings, companies repurchased $882 billion of stock in 2021. (AP Photo/Mary Altaffer)

(AP Photo/Mary Altaffer)

Companies in the S&P 500 bought a record amount of their own stock last year and don’t show any signs of slowing down.

Flush with cash from solid earnings, companies repurchased $882 billion of stock in 2021. Goldman Sachs is forecasting stock buybacks to reach $1 trillion this year, even as companies grapple with rising inflation, higher interest rates and the potential for stunted economic growth.

Companies use repurchases, in part, to return cash to investors and support the stock’s price. Earnings per share can increase because there are fewer shares outstanding. Buybacks also signal confidence from leadership about a company’s financial prospects.

During the fourth quarter, one out of seven companies in the S&P 500 increased their earnings-per-share by at least 4% thanks to their newly lowered share count, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Companies such as Amazon and General Electric have approved additional repurchases, setting the stage for more buybacks in 2022.

Stocks fell as much as 12% to start the year before a recent rally. Silverblatt says indications are that companies continued to buy back shares through the downturn, “which means they’ll be getting more shares for their expenditures and reducing share count even further, resulting in higher earnings per share.”

Goldman Sachs expects buybacks to continue representing the largest use of cash for S&P 500 companies, followed by capital expenses. The trend is being supported by a strong backlog of authorizations to repurchase stock, along with solid earnings growth and high cash balances.

Companies are plowing more of their cash into repurchasing their own stock even as they face higher expenses for raw materials, shipping and labor. So far, companies have largely been able to pass those costs on to their customers, but higher prices on everything from food to clothing could threaten consumer spending. A significant pullback by consumers could crimp sales growth for many companies.

What’s unclear is the eventual impact of interest rate increases by global central banks including the Federal Reserve and Russia’s war on Ukraine. Any unexpected hit to the global economy could put companies in a tighter financial position than they anticipated.

When the pandemic delivered an unexpected hit to the global economy in 2020, many companies encountered steep drops in sales and profits and higher outlays of cash. Many were criticized for having spent lavishly on buybacks the year before instead of building a cash cushion.

For now, companies are plowing ahead with buybacks. Amazon, which was one of the biggest beneficiaries from the pandemic-accelerated shift to online shopping, announced a $10 billion stock buyback plan earlier in March. Other large and notable buyback announcements in March included GE’s plan to repurchase up to $3 billion shares.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Image: A cargo ship is stuck under the part of the structure of the Francis Scott Key Bridge after ...

Associated Press

Authorities identify 2 bodies recovered at site of Baltimore bridge collapse

A major bridge in Baltimore snapped and collapsed after a container ship rammed into it early Tuesday, and several vehicles fell into the river below.

1 day ago

Photo: Mountaineer Jim Whittaker has died at 95....

Gene Johnson, The Associated Press

Lou Whittaker, among the most famous American mountaineers, has died at age 95

Lou Whittaker, a legendary American mountaineer who helped lead ascents of Mount Everest, K2 and Denali, has died at age 95.

1 day ago

File photo: Former Sen. Joe Lieberman speaks in Washington on Jan. 18, 2024....

Associated Press

Former Sen. Joe Lieberman, Democrats’ VP pick in 2000, dead at 82

Former U.S. Sen. Joe Lieberman of Connecticut, who nearly won the vice presidency on the Democratic ticket with Al Gore in 2000, has died.

1 day ago

islamic state attack...

Vanessa Gera, The Associated Press

What we know after the Islamic State group claims responsibility for Moscow massacre

The Islamic State group has claimed responsibility for an attack on a suburban Moscow concert hall that killed at least 133 people.

5 days ago

Moscow shooting...

The Associated Press

Russia: 60 dead, 145 injured in concert hall raid; Islamic State group claims responsibility

Assailants burst into a concert hall in Moscow on Friday and sprayed the crowd with gunfire, killing over 60 people, injuring more than 100.

6 days ago

Photo: Britain's Kate, Duchess of Cambridge visits 282 (East Ham) Squadron, RAF Air Cadets, Cornwel...

Associated Press

Kate Middleton announces she has cancer, is undergoing chemotherapy

Kate Middleton, Princess of Wales, says she is undergoing chemotherapy to treat cancer. She has been out of view since Christmas.

7 days ago

Stock buybacks show no signs of a slowdown so far this year