U.S. companies slowing stock buybacks: TrimTabs

By Lewis Krauskopf

NEW YORK (Reuters) – Corporate America is curbing its appetite for its own stock, a potentially foreboding sign for the stock market, according to TrimTabs Investment Research on Monday.

U.S. companies have announced $291.7 billion worth of buybacks so far this year, about one third lower than the $432 billion announced for the same period last year, TrimTabs said.

June was on pace to be the slowest month of the year, with only $11.8 billion worth of buyback announcements through Friday, including a $2 billion share repurchase announcement by Applied Materials on June 9.

“Corporate America announced $2.8 trillion in stock buybacks in the past five years, and these buybacks have provided a key source of fuel for the bull market,” said David Santschi, chief executive officer of TrimTabs.

“Corporate actions this year suggest this support is going to diminish.”

Britain’s vote to leave the European Union that has rattled global markets stands to further diminish buybacks, Santschi said.

“Companies tend to buy back more when they’re feeling confident and they tend to buy back less when they’re feeling less confident,” he said.

Buybacks also can prop up company earnings, as lowered share counts boost earnings per share, a closely followed metric. A fall in repurchases could increase price-to-earnings ratios, making the stocks look more expensive.

U.S. companies announced about $182 billion in buybacks in the first quarter, according to Birinyi Associates research, putting buybacks on pace for their weakest year since 2012.

(Editing by Marguerita Choy)