Tenaris' Buyback Blitz: A Bold Bet on Long-Term Value Creation

Tenaris (NYSE:TS), a global leader in steel pipes for the energy sector, has embarked on an aggressive share buyback strategy that underscores management's confidence in the company's intrinsic value. The recent €72.8 million repurchase, part of a larger $1.2 billion program, marks a critical phase in Tenaris' capital allocation strategy. This move not only reduces the outstanding share count but also signals undervaluation at current levels, positioning the stock as a compelling buy for investors seeking durable returns.

The Buyback Momentum: From €72.8M to $1.2B

Tenaris' buyback journey began in late 2023 with a $1.2 billion program aimed at repurchasing up to 6.07% of its issued shares. By mid-2024, the company had completed this program, followed by a $700 million follow-up tranche. The June 2025 announcement of another $1.2 billion buyback—equivalent to 6.9% of outstanding shares at current prices—cements Tenaris' commitment to returning capital to shareholders. The recent €72.8M repurchase, finalized in June 2025, brings the total shares repurchased under these programs to over 12% of the initial issued capital, with a further 6.9% slated for cancellation under the new program.

This relentless pace of buybacks has already reduced Tenaris' share count by 0.8% year-to-date in 2025, surpassing the prior 5% threshold breached in 2024. Such systematic reductions amplify earnings per share (EPS) growth, a critical driver for valuations in cyclical industries like steel manufacturing.

Why Share Count Matters: EPS Gains and Undervaluation

The math is straightforward: fewer shares mean higher EPS for each remaining unit. Tenaris' diluted EPS has risen steadily alongside its buybacks. For instance, between 2023 and 2025, the company's share count dropped by 5.8%, while EPS grew by 8.2% (despite volatile energy prices). This leverage effect is especially potent when combined with Tenaris' stable cash flow generation.

Critically, Tenaris' buybacks occur at a time when its stock trades at a 25% discount to the median EV/EBITDA multiple of its peer group. This undervaluation is puzzling given the company's fortress balance sheet—net debt/EBITDA of just 0.5x—and cash flow stability. Management's willingness to deploy capital into shares at these levels suggests they believe the market is mispricing Tenaris' long-term prospects.

Cash Flow: The Foundation of Buyback Confidence

Tenaris' ability to fund buybacks without compromising its investment-grade credit profile is a testament to its financial discipline. The company generated $950 million in free cash flow in 2024, with 2025 guidance pointing to further growth as energy demand recovers. Even in a low-commodity-price environment, Tenaris' operational excellence and geographic diversification (35% of sales in the Americas, 27% in Europe/Africa, and 38% in Asia) provide a cushion against regional volatility.

The controlling shareholder, San Faustin S.A., has also signaled confidence by increasing its voting stake to 66.82%, a move that stabilizes governance while reinforcing the buyback narrative.

Investment Thesis: Buy with a 12-15% Upside Target

Tenaris presents a compelling risk-reward profile. At current prices, the stock trades at 7.2x 2025E EPS, below its 8.5x five-year average and the sector's 9.0x median. If the company executes its $1.2 billion buyback fully by 2026, the EPS accretion alone could push the multiple to 8.8x, implying a 15% upside. Even a conservative 12% return materializes if the stock merely converges to its historical average.

The catalysts are clear: continued buybacks, improving energy capex budgets, and a deleveraged balance sheet. Risks include a prolonged downturn in oil/gas investments or currency fluctuations in key markets, but both scenarios appear less likely given current macro trends.

Conclusion: A Value Investor's Dream

Tenaris' aggressive buybacks are not merely a capital return exercise—they are a bold statement of undervaluation. With a proven track record of converting cash flow into shareholder value, Tenaris is primed to capitalize on its own undervaluation. Investors should view dips as buying opportunities, with a target price of $18–$20 per share (12–15% above June 2025 levels). The path to value creation is clear: buy now, and let Tenaris' buybacks do the rest.

Rating: Buy
Target Range: $18–$20 (12–15% upside)