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In its preliminary results for full-year 2012, Hasbro Inc. (HAS - Analyst Report) revealed that lower holiday product sales in the U.S. and some international markets led it to register lower sales for the year. However, the company will likely register higher adjusted earnings.

For the fourth quarter of 2012, Hasbro announced preliminary revenues of approximately $1.28 billion, down 3.75% year over year. Revenues include a negative $8 million impact from currency translation.

For 2012, the company’s net sales are likely to be $4.09 billion, down 4.7% year over year. Excluding a $99.0 million negative impact from foreign exchange, full year 2012 revenues decline would be 2%.

The Zacks Consensus Estimate for revenues is $1.39 billion for the fourth quarter and $4.20 billion for the full year. The latest announcement indicates Hasbro will miss the Zacks Consensus Estimate.

However, on the basis of preliminary revenues, adjusted earnings guidance for 2012 will likely range between $2.89—$2.91 per share, up from the year-ago earnings of $2.74.

On a GAAP basis, Hasbro’s earnings are expected to range between $2.52 -- $2.54 per share, considerably down from year-ago earnings $2.82 per share. The Zacks Consensus Estimate for earnings per share is $2.84 billion for the fourth quarter.

Management is apprehensive about the growth prospects in certain regions. In a sluggish business environment, management remains committed towards cost-containment efforts and established a strategy to deliver $100 million of annual cost savings by 2015.

However, this cost reduction plan, which includes 10% reduction in workforce, facility consolidation and process improvements, will result in $37 million of pre-tax charges in 2012 and additional $20–$30 million estimated charges in 2013. These actions are expected to pay off in 2013, with full realization in 2015, following the complete implementation of the plan.

Our Take

Hasbro has been reeling under pressure for the last few quarters mainly in terms of its revenues. Although the company had shifted its shipments in the U.S. to the peak season in the fourth quarter and collaborated with other gaming entities, its initiatives do not seem to have come into fruition.
   
However, we have a favorable view of the company’s persistent efforts to curtail costs and at least score on earnings amid a sluggish operating environment. But we would prefer to remain on the sidelines at the current level until we see any definite sign of materialization of aforesaid initiatives.

Hasbro is expected to release its fourth quarter result on Feb 7. One of its peers Mattel Inc. (MAT - Analyst Report) is expected to release its numbers on Feb 1.

Hasbro currently retains Zacks Rank #3 (Hold). Some Zacks Rank #1 (Strong Buy) toy companies that warrant a look include LeapFrog Enterprises Inc. (LF - Snapshot Report) and Nintendo Co. Ltd. (NTDOY).    

Currently, Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Hasbro is +0.82% for the fourth quarter. Although this, along with its Zacks Rank #3, enhances the chance for a positive earnings surprise, we expect estimates to go down in the coming days as the company’s preliminary results for fourth quarter revenue were well short of market expectation.

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