We maintain our Hold rating on shares of Hasbro Inc. (HAS) prior to the release of second quarter financial results. We believe that Hasbro is well-positioned, given our projected operating results and the company's extremely strong financial position. However, we feel that the majority of this potential is currently reflected in the company's share price.

Given the company’s strong product line-up and lucrative product associations with popular motion pictures, we believe that Hasbro should continue to trade at a premium to the peer group and to its primary competitor, Mattel. Hasbro is generating strong performance out of popular items such as the Marvel and Transformers toy lines.

Hasbro's customer concentration is significant. Momentous consolidation in the industry over the last several years has resulted in the vast majority of its sales going to large chain stores, distributors, and wholesalers. Further deterioration of the economy could also lead consumers to cut back on non-essential purchases. Thus, despite the strong operational performance and lower share counts resulting from recent buybacks, we project only moderate earnings growth through 2009.

Shares of HAS are currently trading at 16.4x our 2008 EPS estimate of $2.13. Given the company’s impressive array of products and the fact that it was not involved in the numerous recall activities of 2007, we believe that Hasbro should continue to trade at a premium to the peer group and to its primary competitor, Mattel (MAT). Our $34 price target reflects a multiple of 16x our 2008 EPS estimate.

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