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Why Is Hasbro (HAS) Down 3.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Hasbro (HAS - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hasbro due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hasbro Q2 Earnings and Revenues Beat Estimates, Rise Y/Y

Hasbro reported solid second-quarter fiscal 2021 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. The bottom line outpaced the consensus mark for the fourth straight quarter, while top line beat the same after missing in the preceding quarter.

The company reported adjusted earnings of $1.05 per share, which topped the Zacks Consensus Estimate of 50 cents. In the prior-year quarter, the company had reported adjusted earnings of 2 cents per share.

In the quarter under review, net revenues were $1,322.2 million that beat the consensus mark of $1,193 million. Moreover, the top line rose 54% on a year-over-year basis.

Brian Goldner, Hasbro’s chairman and CEO said “Wizards continued to generate outstanding results behind a compelling analog and digital release schedule for MAGIC: THE GATHERING. Consumer products revenue increased as demand remains robust for Hasbro toys and games and entertainment revenue grew as we are producing entertainment with strong deliveries.”

Brand Performances

During the fiscal second quarter, the Franchise Brand reported revenues of $649.9 million, up 72% year over year. The improvement was backed by growth in MAGIC: THE GATHERING, NERF, TRANSFORMERS, PLAY-DOH, BABY ALIVE and MY LITTLE PONY.

During the quarter, Partner Brands’ revenues rose 53% year over year to $212 million.
 
Revenues at Hasbro Gaming amounted to $147.1 million, up 7% from the prior-year quarter. Its total gaming category revenues increased 63% year over year to $519.4 million.

Emerging Brands’ revenues during the fiscal second quarter jumped 54% year over year to $117 million owing to growth in PJ MASKS, PEPPA PIG, GI JOE, FURREAL FRIENDS and several other properties.

Revenues from TV/Film/Entertainment surged 48% year over year to $196.2 million. The segment revenues benefited from increased deliveries in scripted, unscripted and animated television as well as Music.

Segmental Revenues

During first-quarter fiscal 2021, the company had changed its reportable segments to Consumer Products, Wizards of the Coast and Digital Gaming, and Entertainment.

In the fiscal second quarter, net revenues from Consumer Products segments climbed 33% year over year to $689.2 million. Adjusted operating margin increased to 2.6% from the prior-year quarter’s figure of (-8.7%). The segment benefited from robust growth in Hasbro Franchise Brands, which include NERF, TRANSFORMERS and PLAY-DOH as well as Hasbro products for Marvel and Star Wars along with several other properties.

During the quarter under review, the Wizards of the Coast and Digital Gaming segment’s revenues totaled $406.3 million, improving from $186.7 million in year-ago quarter. The segment’s adjusted operating margin was 47.5% compared with 39.7% in the year-ago quarter. The segment benefited from robust performance of MAGIC: THE GATHERING and DUNGEONS & DRAGONS.

Revenues in the Entertainment segment grew 47% year over year to $226.7 million. However, the segment’s adjusted operating margin decreased to 4.4% from the prior-year quarter’s figure of 5.9%.

Operating Highlights

During fiscal second quarter, Hasbro's cost of sales (as a percentage of net revenues) rose to 26.1% from 29.4% in the prior-year quarter. Selling, distribution and administration expenses — as a percentage of net revenues — were 26.8% compared with 32.7% in the prior-year quarter.

Balance Sheet

Cash and cash equivalents as of Jun 27, 2021 were $1,228.2 million, up from $1,038 million on Jun 28, 2020. At the end of the reported quarter, inventories totaled $429.2 million compared with $499.6 million in the year-ago period. As of Jun 27, 2021, long-term debt increased to $4,388.7 million from $4,802.5 million from Jun 28, 2020.

The company’s board of directors announced a dividend of 68 cents per common share. The dividend is payable on Aug 16, 2021, to shareholders of record at the close of business as of Aug 2.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.06% due to these changes.

VGM Scores

Currently, Hasbro has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hasbro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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