Stock buybacks are expected to fall somewhat out of favor this year as companies grapple with the state of the economy and its impact on earnings. But some big names have defied the trend. Buybacks of stocks within the S & P 500 are down 21% in the first quarter of 2023 compared with the same period a year ago, said Goldman Sachs’ Ryan Hammond. The slide comes as the biggest corporations in America tighten their belts to contend with economic contraction and higher interest rates. For the full year, companies in the S & P 500 are expected to spend a total of $808 billion repurchasing shares in 2023, Hammond said. That would mark an approximately 15% fall from the $950 billion seen in 2022. Still, the 2023 projection is around 50% higher than the amount spent in 2020. Buybacks are an area of corporate spending that the analyst estimates should be particularly hard hit this year. In total, cash spending from companies in the S & P 500 is expected to fall by a relatively modest 1% in 2023, alongside decelerating earnings per share growth. Hammond expects companies to spend more on dividends, capital expenditures and research and development in 2023 versus last year, while the amount spent on buybacks and cash acquisitions is expected to shrink. “The slowdown is already under way, particularly in buybacks,” he said in a Tuesday note to clients. Hammond also said buybacks could be especially hard hit in a recession scenario as they are one of the “most volatile uses of cash.” Still, he said investors will reward the companies that return cash to shareholders more than those investing in growth in the current environment. He noted that companies returning cash to shareholders have outperformed those investing excess cash in research and development by 3 percentage points since March 8. With this in mind, Hammond screened the 10 largest buyback-paying stocks in the fourth quarter of 2022. Of the 10, only Meta Platforms and Microsoft have increased their buybacks in the first quarter of this year. META MSFT YTD mountain Meta and Microsoft Facebook-parent Meta increased its share repurchase authorization to $40 billion. By comparison, the company bought back about $28 billion in shares last year. Microsoft, meanwhile, increased its buyback by just 1% from the prior quarter, according to Hammond. Both announcements come as technology companies have tried to curb costs through measures like layoffs amid concerns over the broader economy and cooling advertising spending. Notably, Apple and Alphabet , the two companies with the most buybacks in the fourth quarter of 2022, both pulled back on the amount they put toward share repurchases this quarter, he said. — CNBC’s Michael Bloom contributed to this report
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