Walt Disney (DIS 1.34%) fell after reporting first-quarter fiscal 2026 earnings on Feb. 2.
Results were solid overall, but investors may be concerned that Disney's streaming video on demand (SVOD) service isn't growing quickly enough to offset the slowdown in its linear networks (cable) business. Additionally, Disney's sports business, which still relies heavily on cable, also continues to struggle. But the experiences business, driven by parks and Disney's rapidly growing cruise lines, remains a cash cow.
With new CEO Josh D'Amaro replacing Disney legend Bob Iger on March 18, some investors may be hesitant to scoop up shares, even with the stock fetching a dirt cheap 15.7 forward price-to-earnings ratio.
Here's the most overlooked hidden gem from Disney's latest earnings report and why the value stock is an excellent buy now.
Image source: Walt Disney.
Disney's near-record buyback plan
For fiscal 2026, Disney is guiding for $7 billion in stock buybacks, which is double what it did in fiscal 2025 and the second-highest annual buyback plan ever, behind fiscal 2017.
Disney will fund the buyback program with free cash flow (FCF). It projects a staggering $19 billion in cash from operations, with capital expenditures guidance of $9 billion -- leaving $10 billion in FCF to cover buybacks and Disney's dividend expense of roughly $2.6 billion.
NYSE: DIS
Key Data Points
Returning capital to shareholders
Disney's decision to aggressively repurchase stock rather than boost its dividend is a vote of confidence that management believes the stock is undervalued. Over the long term, buying back stock at a compelling valuation can be a far better way to return cash to shareholders than paying a growing dividend.
A good example is Apple (AAPL 1.93%), which has reduced its outstanding share count by nearly a third over the last decade while the stock price has increased by 910%. By repurchasing stock, Apple gave each shareholder a larger stake in the company, which was a phenomenal use of capital, given how well the stock has performed.
With 1.772 billion shares outstanding at a share price at the time of this writing of $103.68 -- Disney's $7 billion buyback program could reduce its share count by around 67.5 million, or 3.8%. That is a massive decrease in one year. Of course, Disney's buybacks will occur throughout the year at varying price points.
For context, Apple spent $90.71 billion on buybacks in fiscal 2025 -- reducing its diluted share count by 2.6%. So Disney has the chance to make a real dent in its share count and return significant value to shareholders.
Best of all, these buybacks aren't impacting Disney's long-term growth aspirations. The company is investing heavily in expanding its cruise fleet, renovating and expanding its parks, producing box-office and streaming content, supporting its broadcasting and linear networks, and more.
A high-conviction buy
Disney may not be growing quickly, but it is generating consistently high FCF that it can use to strategically buy back its stock. The company's streaming business is now profitable, and margins are improving, whereas just a few years ago, it was losing money and depleting cash from the experiences segment.
With a dirt cheap valuation and guidance for double-digit adjusted earnings per share growth in fiscal 2026, Disney stands out as one of the best value stocks to buy in February.
