Stock buybacks fall 44 percent
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- September
- 23
Companes struggling with an uncertain economy, lower earnings and the credit crunch have sharply reduced their stock buyback programs this year.
Share repurchases by companies in the S&P 500 index are expected to fall 44.3 percent to $87.9 billion during the second quarter to the lowest levels in three years, according to Standard & Poor’s.
Standard & Poor’s expects further drops in share repurchase activity in the third quarter, when the fallout from the credit crunch resulted in the most volatile market conditions since the bear market from 2000-2002.
“Buybacks entered a different stage during the second quarter, as uncertainty grew and commitment to significant cash outflows for purchases declined,” said Howard Silverblatt, senior index analyst at Standard & Poor’s in New York City.
In good times, buying back stock can be an important signal that management is confident about the future. But growing numbers of corporat executives have turned cautious about large cash expenditures for stock buybacks given the present economic clouds.
The financial sector, hit hard by the subprime mortgage crisis and the weakening housing market, accounted for only 6.6 percent of the stock repurchases during the second quarter, according to Standand & Poor’s.
Several major financial companies that have a major presence in the lower Hudson Valley, including Morgan Stanley, Citigroup and JPMorgan Chase & Co., have already suspended stock buyback programs, according to Bloomberg News.
Retailers such as Macy’s Inc. also have put share buybacks on hold as consumer spending slows in a weakening economy.
Information technology companies, however, have recently increased share repurchases and account for 26 percent of all buybacks, according to Standard & Poor’s. In February, the board of of Armonk-based IBM Corp. authorized an additional $15 billion to buy back shares of the company’s stock. Stock buybacks can boost a company’s earnings per share by reducing the number of shares outstanding.
This entry was posted
on Tuesday, September 23rd, 2008 at 12:46 pm by Jay Loomis.
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