When will Disney be able to resume its share buyback program?

BMO Capital's point of view

BMO Capital analyst Daniel Salmon "outperformed" his rating on the Walt Disney Company (DIS) because of his positivity to the launch of Disney + and its Wars of the Stars-theme parks based. Salmon also expects the company to seek to buy back shares next year.

Disney has temporarily suspended its share buyback program because of its high debt levels. He expects to resume stock repurchases after improving his cash-to-debt ratio with a single rating. Its debt ratio was 0.22 at December 31, 2018, above its level of 0.20 in the previous quarter. A company can repay its debt using its cash if its ratio is greater than 1.

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Disney is committed to reducing its debt

Disney's debt is high due to its acquisition by 21st Century Fox (half in cash and shares) and the upcoming launch of its Disney + streaming service. Disney also acquired a debt of approximately $ 19.2 billion from Fox.

Meanwhile, the company is trying to reduce its debt. He reduced his debt from $ 26.09 billion in early 2018 to $ 20.66 billion by the end of 2018. His sale of a 39% stake in Sky to Comcast (CMCSA), based in London, last September, helped her to reduce her debt. charge and invest in its direct offer to Disney brand consumers.

Last month, Disney sold its 80% stake in the YES (Yankee Entertainment and Sports) regional sports network to the New York Yankees network for $ 3.5 billion, further helping to reduce debt. . Amazon (AMZN), Sinclair Broadcast Group (SBGI) and Blackstone (BX), the main investors in the New York Yankees, together hold a 20% stake in YES.