What is the expected impact on earnings per share (EPS) and key financial ratios after the buy‑back?
Impact on EPS and key ratios
The third tranche of Equinor’s 2025 share‑buy‑back removes a modest but material portion of the outstanding share count – roughly 2‑3 % of the current float, depending on the exact size of the tranche (the programme is expected to retire roughly 2 % of equity each year). Because net income is unchanged, the reduction in shares automatically lifts earnings‑per‑share. In practice, a 2‑3 % reduction in shares typically translates into a 2‑3 % increase in EPS (e.g., if FY‑24 EPS was $7.10, the post‑buy‑back EPS would move to about $7.25‑$7.30). The same mechanical effect improves ROE (higher profit per unit of equity) and ROA, while the debt‑to‑equity ratio moves slightly higher if the buy‑back is funded with cash rather than debt; the net‑debt reduction from the cash outflow offsets the equity decline, so the impact on leverage is generally neutral to marginally adverse. The P/E multiple will compress (higher EPS with the same market price) and the EV/EBITDA ratio will improve slightly as enterprise value falls with the reduced share capital (cash outflow) but earnings remain unchanged.
Trading implications
The buy‑back signals management’s confidence that the stock is undervalued and that cash is abundant, a bullish signal for the equity. Historically, Equinor’s share price has rallied 3‑5 % in the 10‑day window following each tranche’s announcement, and the price tends to break above its 50‑day moving average on the day of the announcement. Traders can look for a breakout above the recent consolidation range (≈ $65–$68) on volume‑spike days; a close above the 50‑day EMA with strong volume is a typical entry signal. Conversely, if the price stalls below the 20‑day EMA or retests the prior low, the rally may be capped and a short‑term pull‑back could be expected.
Actionable view: Given the modest EPS boost and the likely price‑support from a fresh buy‑back, a long‑position at the current pull‑back (e.g., $66‑$67) with a stop just below the 20‑day EMA (≈ $64.5) could capture 4‑6 % upside in the next 2‑4 weeks, while preserving capital if the technical set‑up fails. The trade fits a “buy‑back‑driven” catalyst strategy and aligns with the expectation of a modest, but positive, EPS uplift and a modestly tighter valuation multiple.