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Can Hasbro Continue to Grow Despite Prevalent Headwinds?

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On Dec 5, we issued an updated research report on toymaker, Hasbro, Inc. (HAS - Free Report) .

Shares of the company widely outperformed the broader Zacks categorized Toys/Games/Hobby Products industry year to date. While the stock surged over 25%, the broader market witnessed growth of about 5% during the same time period.

Also, upward estimate revisions reflect optimism regarding the stock’s prospects. The Zacks Consensus Estimate for full-year 2016 earnings moved north by nearly 2% over the last 60 days.

Moreover, the company has a positive earnings and revenue surprise history for all the trailing seven quarters. The average earnings beat for the last four quarters is 21.76%.


Hasbro’s outperformance is a result of various factors to date. One of them is the continuous growth in the Boys segment since the beginning of 2014. The segment  witnessed revenue growth for the 11th consecutive quarter in the third quarter of 2016. Driven by strong consumer insights, global digital content, innovative products and comprehensive retail execution, the segment is expected to upkeep the trend, going forward.

Meanwhile, given Hasbro’s strong product line up, which includes its core brands, licensed brands and lucrative product associations, the company remains well positioned for future growth. Its innovative and productive plans for Transformers Franchise over the next 10 years are expected to drive the top-line too.

Moreover, Hasbro has a supreme gaming portfolio and is refining gaming experiences across a multitude of platforms like face to face gaming, off the board gaming, and digital gaming experiences in mobile. In particular, it is ramping up its digital gaming efforts as the market has strong growth prospects.

Additionally, the company’s consistent efforts to establish its global presence through strategic partnerships and rapid growth in emerging markets bode well. These emerging markets in Eastern Europe, Asia and Latin and South America offer greater opportunities for revenue growth than developed markets. These markets have been contributing significantly to Hasbro’s revenues, given its investments in advertising and other brand building efforts.


Although Hasbro is making efforts to boost its sales, all its brands have not been able to reap the benefits yet. Notably, although the Girls segment posted higher revenues in the first three quarters of 2016, it did not perform well throughout 2015. It remains to be seen what the future of this segment holds.

Foreign exchange losses and persistent higher costs related to initiatives are expected to hurt the company’s margins amid an already challenging consumer spending environment.

Our Take

Despite prevalent risks to the top- and bottom-lines Hasbro’s shares have seen rapid growth year to date. Currently, the company provides a return on equity (trailing 12 months) of 32.3%, much higher than other similar gaming companies like JAKKS Pacific, Inc. (JAKK - Free Report) , Mattel, Inc. (MAT - Free Report) and Nintendo Ltd. (NTDOY - Free Report) . Moreover, it is trading at a P/E metric lower than most of its industry peers. However, it remains to be seen if the company can continue growing even now or has it reached its saturation stage.

Presently, Hasbro carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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