Leading toy maker, Hasbro Inc. (HAS - Analyst Report), recently extended its multi-year licensing agreement with The Walt Disney Company (DIS - Analyst Report). Per the contract, Hasbro will continue to design and market toys and games modeled on Marvel’s portfolio of characters. The toy maker will pay $80 million as royalty fee to Disney for extending its association with Marvel for two more years.
Hasbro is also considered as the premier licensee for Disney’s another popular entertainment property –Star Wars – till 2020. The Lucasfilm acquisition in late 2012 led to the incorporation of the world-famous film series and media franchisee – Star Wars – into Disney’s entertainment portfolio. Since both the Lucasfilm and Marvel agreements cover the similar grounds and are valid through 2020, the terms and conditions of the deals were aligned.
In addition, Disney will receive $225 million from Hasbro following the release of three Star Wars films, the first of which is slated for a 2015 release.
High demand for Marvel characters has made it a lucrative target for Hasbro. Management believes that this deal will enhance the company’s coverage in the industry.
This news came in the day company released its second-quarter 2013 results. Hasbro second-quarter 2013 adjusted earnings per share of 29 cents fell short of the Zacks Consensus Estimate by 17.1% and the year-ago level by 12.1%. A sluggish top line combined with operating margin pressure resulted in the year-over-year decline in earnings. Hasbro’s net revenue of $766.3 million declined 6% from the year-ago quarter, mainly hurt by persistent weakness in the Boys Category which accounts for about one-third of total revenue. In such a situation, enhancing the association with Disney will allow Hasbro to boost investors’ confidence.
Hasbro currently carries a Zacks Rank #3 (Hold). Some toy companies that are currently performing well are Activision Blizzard, Inc. (ATVI - Snapshot Report) and LeapFrog Enterprises Inc. (LF - Snapshot Report) both carrying a Zacks Rank #2 (Buy).