In its latest move to enhance shareholders’ value, The Walt Disney Company (DIS - Analyst Report) now intends to repurchase $6 billion to $8 billion of shares in fiscal 2014, Reuters reported. Jay Rasulo, the Chief Financial Officer of this diversified media entertainment company said that the buyback activity to some extent will be funded by borrowed capital in a manner that the debt rating is maintained.
If we look at Disney’s buyback history, this Zacks Rank #3 (Hold) stock has shown significant jump in its stock repurchasing activity with this announcement.
The company had repurchased 72 million shares for $3 billion during fiscal 2012, 135 million shares for $5 billion during fiscal 2011 and 80 million shares for $2.7 billion in fiscal 2010. In the first nine months of fiscal 2013, the company had bought back 49 million shares for $2.7 billion. In the last concluded quarter, Disney repurchased 12.6 million shares for approximately $800 million.
We believe that Disney’s prudent cash balance coupled with the capability of generating healthy cash flow from recent investments made in the past as well as borrowing capacity provide ample avenues to garner fund for operational activities, capital expenditures and other expansion programs.
Disney remains focused on deploying its capital toward expanding its Parks and Resorts business, and in turn, enhancing its markets and creating long-term growth opportunities. The company will inaugurate a new theme park resort in Shanghai in 2015. The company also made it clear that it will continue to extend its wings through acquisitions, as done in the past, citing examples of Lucasfilm and Marvel Entertainment. Moreover, the company is gradually enhancing its operations in emerging economies such as Russia, China and India.
Walt Disney is one of the world’s largest diversified entertainment companies and commands a formidable portfolio of globally recognized brands, primarily its namesake brand – Walt Disney, followed by ABC, ESPN, Pixar and Marvel. These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like Twenty-First Century Fox, Inc. (FOXA - Analyst Report), Time Warner Inc. (TWX - Analyst Report) and CBS Corporation (CBS - Analyst Report).