Share buybacks are important for the stock market because, all else being equal, they increase earnings and equity per share. With earnings per share and equity rising, the stock price has little else to do but follow the leader to new highs. The stocks on the list today buy back shares in significant amounts and have recently upped their authorizations. The tailwind provided by the new capital allocation is robust and likely to drive the respective stock prices higher over the next twelve months and longer.
Corteva to Buyback 7.5% of Its Stock
Corteva (NYSE: CTVA) is an agricultural company focused on seeds and crop protection, generating ample cash flow and repurchasing significant amounts of stock. The latest news is an additional $3 billion authorization bolstering the remaining allotment to $3.75 million. The new authorization is worth 7.5% of the stock at the time of the announcement and a robust tailwind for the price action. Repurchases in 2024 have been substantial, reducing the count by more than 1% YTD at the end of Q3, and are expected to continue at this pace in 2025.
Dividend distributions compound Corteva’s buybacks. In 2024, the dividend is worth $0.68 per share annually and is expected to grow over the coming years. The company pays out only 28% of its earnings and has a fortress balance sheet capable of sustaining share buybacks and dividends. Buybacks play into the dividend growth outlook, reducing the number of shares to be paid. Regardless of earnings growth, the company can sustain a positive dividend distribution CAGR in this scenario. Earnings growth is expected. Analysts are forecasting top and bottom-line growth to resume in F2025 and to be sustained through the decade's end.
The analysts’ sentiment and institutional buying trends also support the price action in this stock. Analysts rate it as a Buy and have raised their price targets since mid-year. The consensus assumes a 5% upside while the revision trend puts the market near $70, sufficient to set a new all-time high. Institutional activity also shifted mid-year, with the balance of activity turning bullish in Q3 and holding steady in Q4.
AECOM Is Hot: Stock on Track to Hit $140
AECOM (NYSE: ACM) is a globally positioned infrastructure consulting firm with operations in architecture, engineering, construction, and project management. Results in 2024 exceeded expectations and included improved guidance backed up by record backlog and pipeline activity. Highlights from the year include robust cash flow and FCF conversion, which allow for sustained balance sheet health and significant capital return increases. The company raised its dividend by 18% and increased the share repurchase authorization to $1 billion, or nearly 7% of the market cap when it was announced.
The dividend is only 20% of the earnings forecast, so investors might expect dividend increases to continue annually and share repurchase activity to remain strong. Buybacks in Q4 reduced the count by 3.0% for the quarter and 2.6% for the year. The analysts rate this stock as a Buy, and the revision trend is leading the market to $130, a low target compared to the more robust $140 target implied by the technical price action.
EOG Resources Has a Reputation for Improving Shareholder Value
EOG Resources (NYSE: EOG) is a small oil and gas play with operations in Texas and the Caribbean. Its history includes healthy cash flow and capital returns, including dividends, dividend growth, and share buybacks. Details at the end of Q3 include a 7% dividend payout increase and the buyback authorization lifted to $5 billion. The $5 billion is worth nearly 7% of the market cap and will benefit shareholders. Buybacks in Q3 reduced the count by 2.2%.
The bad news is that EOG plans to fund the buyback increase with debt. The company plans to raise its debt to about $5 billion over the next year, which is a cause for concern. However, the company’s balance sheet is a fortress, so there is no red flag. The company is net cash and would remain so even with debt at $5 billion. Leverage is also very low, with long-term debt (including the expected increase) less than 0.2x equity. Analysts rate this stock as a Hold and see it advancing at least 10% in 2025.
