The overall sum of stock buyback statements from American companies slowed to its deepest level in the matter of four years potentially undercutting one of the main drivers of the current bull market, said TrimTabs Investment Research on Tuesday.
According to Reuters, roughly $1.8 billion per day, the total 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.
"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."
"It’s not a good sign" for the stock market, Santschi added. "Buyback volume has a fairly high correlation with stock prices."
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."
Five companies have announced buybacks of at least $3 billion during the current earnings season, TrimTabs said, including $5 billion plans from Biogen, Visa, and CBS.