TrimTabs: Corporate Stock Buybacks Continue Downward Trend in Q2

Corporate America is uncertain about the outcome of Trump’s corporate tax proposals, which analysts expected to boost stock buybacks.

Corporate stock buybacks in the second quarter earnings season were at the lowest level in more than five years, TrimTabs Investment Research reports.

Newly announced “cash takeovers” and stock buybacks amounted to only $58 billion for the second quarter. After hitting a high of $427 billion in the second quarter of 2015, corporate buying has slowed,TrimTabs said.

According to the San Francisco-based institutional research firm, announcements on stock buybacks were “at an average of 2.6 for $1.3 billion daily” in the second quarter earnings season. This was the lowest volume of announcements since April and May of 2012. And a mere four companiesWalgreens Boots Alliance, Aflac, eBay, and Fidelity National Information Servicescame out with buybacks of more than $2 billion.

David Santschi, CEO of TrimTabs, noted that buybacks have been in a two-year downtrend that doesn’t seem to be improving. “Corporate America is shutting its wallet as stock prices reach records,” said Santschi. “Corporate leaders may be losing faith in the Trump administration’s ability to deliver on its promises and worried about the impact of less central bank support for asset prices.”

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And according to a CNBC news report, although analysts expected stock buybacks to get a boost if the Trump administration’s corporate tax cuts went through, that impact hasn’t materialized yet. In fact, domestic stock buyback funds have lagged the S&P 500 since Trump’s election. This comes about amidst uncertainty relating to the outcomes for Trump’s tax reform proposals.

“The US stock market isn’t likely to get as much of a boost from companies as it did in previous years,” Santschi said.  “Apart from the too-big-to-fails, fewer companies are willing to use lots of cash to support share prices.”

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