U.S. companies' stock buyback plans hit four-year low: TrimTabs

NEW YORK (Reuters) - The value of stock buyback announcements from U.S. companies slowed to its lowest level in four years, TrimTabs Investment Research said on Tuesday, potentially undercutting one of the main drivers of the current bull market.

A man passes by the New York Stock Exchange during a rain storm in New York February 24, 2016. REUTERS/Brendan McDermid - RTX28FT7

At $1.8 billion a day, the amount of buyback announcements from U.S. companies during the nearly completed second-quarter earnings season is tracking to the lowest since the same period of 2012, according to TrimTabs, which compared six-week periods during which companies report quarterly results.

The number of companies announcing buybacks has also fallen, averaging 3.3 a day so far, the lowest since the third quarter of 2013 and well below the 6.1 per day during earnings season a year ago.

“Buyback activity has been disappointing in earnings season,” said David Santschi, chief executive officer of TrimTabs.

“The reluctance to pull the trigger on share repurchases suggests corporate leaders are becoming less enthusiastic about what they see ahead.”

Stock buybacks prop up share prices as a decrease in the number of shares outstanding boosts earnings per share, and have been an important factor in propelling the market to record highs.

While companies may have dialed back their buybacks, the extent of the slowdown remains to be seen. The strong current pace of corporate debt issuance could provide new fuel for ramping up stock repurchases, said Brian Reynolds, chief market strategist at New Albion Partners in New York.

“We have seen throughout this credit cycle, sometimes the buybacks grow faster and sometimes they grow slower,” Reynolds said. “Going forward, there is plenty of ammunition to boost share buybacks should CEOs feel the need.”

The latest buyback data shows the continued sluggish pace of repurchases this year. According to TrimTabs, the total amount of announced buybacks through July is down 21 percent from the same period a year ago.

“It’s not a good sign” for the stock market, Santschi said. “Buyback volume has a fairly high correlation with stock prices.”

Five companies have announced buybacks of at least $3 billion during the current earnings season, TrimTabs said, including $5 billion plans from Biogen Inc BIIB.O, Visa Inc V.N and CBS Corp CBS.N.

Reporting by Lewis Krauskopf; Editing by Rodrigo Campos and Jonathan Oatis