Strong European buybacks to continue in 2025 - Barclays

European corporates announced significant share buyback programs in 2024, and Barclays (LON:BARC ) expects this strong buyback activity to continue in 2025. 

STOXX 600 companies announced share buyback program of around E290 billion, making 2024 the third-highest buyback volume year ever, analysts at Barclays said, in a note dated Jan. 9. 

“The Energy sector hit a record high with 11% Mcap buyback programs announced, up from last year. Tech also saw an increase, announcing 4.3% MCap in buybacks. Finally, Financials companies announced 2.5% MCap, slightly below last year,” the UK bank said.

Shrinking equity supply has been an on-going theme for European stocks over the last three years. Share repurchases have driven overall MSCI Europe share count lower over this period, and buybacks have generated a 1.9% yield for the STOXX 600 and contributed to 40% of the total shareholder yield. 

“Given Europe's fragile macro backdrop - weak macro data, concerns around potential policies of the incoming Trump administration in the US and China hazard, some self-help is needed for the equity market, and we believe buybacks should be considered as a theme,” Barclays added.

Around 2% of trading volume on the STOXX 600 in 2024 came from share buybacks. This percentage has been rising steadily since 2020, reaching its peak last year. 

“Nearly 75% of buyback programs set to end in 2025 are yet to be executed, which opens the door for continued high buyback execution in 2025,” Barclays added.

The UK bank expects earnings growth of 4% in 2025 for the STOXX 600, consistent with sustained buyback activity but slightly below the IBES consensus of 8%.

“Q4 2024 results season is about to commence, and it has historically been a big quarter for new buyback policy announcements. On average, 36% of total new buyback policies are announced during Q4 results, compared with 21% in other seasons,” the bank added.

 

 

Source: Investing.com