On Aug 23, we issued an updated research report on toymaker, Hasbro, Inc. (HAS - Free Report) .
Shares of the company have underperformed its industry year to date. While the stock has been up over 16.2%, the industry gained 36.5%.
Meanwhile, Hasbro’s recent earnings estimates have been mixed at best. While the Zacks Consensus Estimate for current-quarter earnings has moved down 4.9% in the last two months, the current-year estimate has climbed 3.1%. These mixed expectations indicate that while analysts have some apprehensions about the stock in the near term, the stock’s growth story might be good in the future.
Moreover, the company has a positive earnings surprise history for all the trailing ten quarters. The average earnings beat for the last four quarters is 19.06%.
The company’s consistent top- and bottom-line performance on the back of strategic partnerships and rapid growth in the emerging markets, has given the stock this momentum.
Hasbro seeks to boost revenues by increasing the visibility of its brands through various modes of entertainment including motion pictures. Given its strong product line-up that includes its core brands, licensed brands and lucrative product associations, the company remains well positioned for future growth. Greater focus on entertainment-backed products continues to bode well.
Meanwhile, the toymaker continues to enter into or leverage existing strategic licenses that complement its brands. Also, it has primary licensing agreements with various entertainment and film, and television production companies. These, in turn, would help in maintaining the flow of revenues.
Moreover, Hasbro has a supreme gaming portfolio and the company 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, the digital gaming market has strong growth prospects and consequently Hasbro is ramping up its digital gaming efforts.
The company also seeks to grow its international business by expanding into the emerging markets of Eastern Europe, Asia and Latin and South America. These markets offer greater opportunities for revenue growth than developed markets. Additionally, they have been contributing to a significant share of Hasbro’s top line, given its investments in advertising and other brand building efforts.
In fact, despite difficult operating conditions in some key markets, Hasbro’s emerging market revenues (excluding currency impact) have increased consistently since 2012. This is a trend that is anticipated to continue in 2017 as well.
Toy manufacturers have to battle a broad array of alternative modes of entertainment including video games and other electronic devices. Evidently, Hasbro’s revenues have been under some pressure over the past few quarters due to lower demand for games as children are opting for electronic versions of games on smartphones and tablets.
Meanwhile, consumer spending uncertainty continues in the United States as customers are restraining their non-essential purchases. In addition, weak performance in Latin American markets like Brazil due to a challenging macroeconomic environment remains a concern.
Hasbro also continues to grapple with higher costs related to initiatives such as launch of new products and investments in technology that are expected to weigh on near-term margins.
Furthermore, the company’s considerable international presence exposes it to the risk of fluctuations in currency exchange rates, which ultimately might pressurize the top line.
Zacks Rank & Stocks to Consider
Hasbro currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Activision Blizzard, Inc. (ATVI - Free Report) , Nintendo Co. (NTDOY - Free Report) and Glu Mobile Inc. (GLUU - Free Report) . While Activision Blizzard sports a Zacks Rank #1 (Strong Buy), Nintendo and Glu Mobile carry a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Activision Blizzard and Nintendo delivered an average positive earnings surprise of 39.81% and 190.04%, respectively, in the last four quarters. Meanwhile, Glu Mobile’s Zacks Consensus Estimate for the current-year’s loss is 83% narrower than previous year.
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