90% Of Materials Firms Burned Billions On Bad Buybacks - Meet The 3 Winners

Turns out, when it comes to share repurchases, most materials companies may have been better off buying the S&P 500.

JPMorgan analyst Jeffrey Zekauskas just gave the sector a reality check: Of 31 major Materials firms tracked since 2019, nearly two-thirds saw negative absolute returns on their buyback programs. Even worse, 24 of them underperformed a simple S&P 500 ETF investment, even after accounting for taxes.

The conclusion? These repurchases weren't just disappointing but financially destructive.

Across the group, billions were poured into buybacks that cratered in value. Celanese Corp (NYSE:CE) sank over $1.47 billion into repurchases, only to underperform a hypothetical S&P 500 investment by more than $2.5 billion. Dow Inc. (NYSE:DOW) fared even worse, erasing $3.5 billion in relative value. And Huntsman Corp. (NYSE:HUN) torched $1.6 billion with an eye-watering 61.5% drop in buyback value.

But it wasn't all gloom.

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Linde, Corteva, CF Prove Buybacks Can Work – If You Pick Your Spots

Among the few bright spots, Linde Plc (NASDAQ:LIN) stands tall. With a 58.7% return on buybacks – and a nearly $8.8 billion edge over the S&P 500 – the industrial gas giant proved that timing, valuation, and execution still matter.

Corteva Inc (NYSE:CTVA), up 47.9% on its buybacks, outperformed by $1.36 billion. CF Industries Holdings, Inc. (NYSE:CF) delivered a 40.1% gain and a $1.16 billion upside vs. the index.

What makes these companies different? For one, they've all posted significant share price gains over the six-year period — Corteva is up nearly 56%, and CF has surged 54%, easily outpacing the S&P 500's 40.5% gain. Contrast that with firms like Tronox Holdings PLC (NYSE:TROX), where the stock collapsed over 60%, and the case for more disciplined capital return becomes clear.

Time For A New Materials Playbook?

Zekauskas' note makes a clear case: most Materials firms engage in buybacks without publishing any assessment of the value generated. Instead of accountability, there’s a blind faith in EPS boosts – which also conveniently pad executive comp packages.

Investors would be wise to scrutinize buyback programs in this sector, especially when management remains mum on returns. Until there's more transparency – and better timing – the Materials sector might want to trade in its buyback habit for one that’s a bit more… constructive.

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