Wall Street Expects 5.2% Earnings Growth for Q2

Two quick notes to pass along. Bloomberg notes that Wall Street currently expects Q2 earnings growth for the S&P 500 of 5.2% and sales growth of 3.2%. That’s down from early April when expectations were for earnings growth of 7.3% and sales growth of 3.7%. As odd as it may sound, that lowering of expectations is much less dramatic than it had been for previous quarters.

In the Wall Street Journal, E.S. Browning notes that companies have been buying back their own stock at a torrid clip: “Companies purchasing their own shares represent the single biggest category of stock buyers today, according to a study this month by Jeffrey Kleintop, chief market strategist at brokerage firm LPL Financial.” Last year, companies spent nearly $600 billion buying back their own stock.

I’m not a terribly big fan of share buybacks. I’d rather see that money distributed to shareholders as dividends. Ideally, our tax laws shouldn’t favor one method over another. I also don’t like how share buybacks are used to mask executive compensation. Many companies that buy back shares don’t decrease their share count whatsoever, though there are some exceptions. Also, companies shouldn’t be in the business of deciding if their stock is at a good price or not. Lots of companies spend tons of money buying back over-priced shares. I’d rather see companies focus on business and let me as an owner decide what to do with my share of the profits.

Posted by on June 30th, 2014 at 4:06 pm

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