Analysts from Goldman Sachs named the European stocks they predict will announce significant buybacks until 2024 — which they say will present substantial upside to their share prices. Companies buy shares back from investors for several reasons, such as having a strong balance sheet and making valuations more attractive, Goldman’s analysts highlighted in a Sept. 7 note. Buybacks essentially reduce the amount of shares in circulation and can bump up their price — one of many ways companies can reward shareholders. More than 25% of the Euro Stoxx 600 companies mentioned buybacks on their earnings calls in the first and second quarter of the year, more than double the level from just a few years ago, the analysts noted. Sectors with the greatest concentration of buybacks include energy, financials and information technology, they added. In Europe, “buybacks have historically comprised [around] 20-25% of shareholder return (dividend yield + buyback yield) over the last 20 years, but have increased in recent years to close to 35% as of the end of 2022. The buyback yield is still 1.8%, [around] 140 basis points below the dividend yield of 3.2%,” the analysts wrote. However, with a gross yield of 1.8% the analysts noted that buybacks still “meaningfully trail” the 3% gross yield in the United States. Stocks with massive upside potential On its list of “companies forecast to execute buybacks over 2022-24,” Goldman Sachs included financial players NatWest Group , Lloyds Banking Group , Barclays and BAWAG Group . NatWest Group is expected to have a share reduction of 18% between 2022 and 2024. Even so, the stock is buy-rated by Goldman Sachs and is on its conviction list. The bank gave it a 12-month upside potential of 115% from its £233 ($290.79) close on Sept. 4. Britain’s Lloyds Banking Group was also rated a buy, and given 91% upside amid expectations of a 12% reduction in its share count till 2024. Barclays — which is penciled to have a share reduction of 11% between 2022 and 2024 — was also rated a buy. Goldman gave it 86% upside from its £150.80 close on Sept. 4. Meanwhile, fellow financial company BAWAG Group received a neutral rating from Goldman, and was given 52% upside. The company is looking at a 12% share reduction over the next two years. Media and internet company Prosus also made it to Goldman’s list. The buy-rated company is looking at a 63% upside from its 65 euro ($69.66) close on Sept. 4 and is expected to have a 10% reduction in its share count between 2022 and 2024. — CNBC’s Michael Bloom contributed to this report.
