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Stephen Gandel

Share Buybacks Distort Profit Picture

The earnings-per-share equation is out of whack.

Does this make my bottom line look too big? — Does this make my bottom line look too big?
Photographer: Douglas/Three Lions/Getty Images

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June 13, 2018, 12:45 PM UTC

Share buyback promises are running higher than actual purchases. If that flips, it could create a problem, not just for policy makers who want to portray President Donald Trump’s tax cut as worker friendly but for investors as well.

The Trump tax cut has certainly created a boom in buyback announcements. Companies in the S&P 500 have announced plans to repurchase just more than $500 billion worth of their own shares this year. That would already be a six-month record, according to data from Birinyi Associates Inc., and the second quarter still has a couple of weeks to go.