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Hasbro (HAS) Q4 Earnings: Franchise & Partner Brands in Focus

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Hasbro, Inc. (HAS - Free Report) is scheduled to report fourth-quarter 2018 results on Feb 8, before the opening bell. The company’s earnings missed the Zacks Consensus Estimate in the preceding quarter by 13.8%. Like most other traditional toymakers, Hasbro’s performance was affected by declining consumer demand and sales crunch.

What to Expect?

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.68, which is considerably lower than $2.30 in the year-ago quarter. Notably, the consensus mark has also witnessed downward revision of 3 cents over the past 30 days. For revenues, the same stands at nearly $1,524 million, reflecting a 4.5% decline from the prior-year quarter.

Let’s take a look at factors that are likely to have impacted Hasbro’s results in the fourth quarter.

Franchise & Partner Brands' Dismal Show to Continue

Like most other U.S. traditional toymakers, Hasbro is facing a dearth of consumer demand for quite some time now. Notably, Hasbro has recorded dismal sales over the past few quarters due to the Toys ‘R’ Us liquidation and trend is likely to continue in fourth-quarter 2018. In fact, owing to the liquidation, sales of Hasbro have declined mostly across Franchise and Partner brands. We believe the Franchise and Partner brands will once again perform disappointingly in the quarter to be reported.

Currently, Hasbro is facing declining demand for traditional toys. Similar to most other companies, Hasbro has been competing with providers of a broad array of alternative modes of entertainment — including video games, MP3 players, tablets, smartphones and other electronic devices. Due to shift in demand patterns of kids, Hasbro’s revenues are pressurized and not likely to recover soon.

Higher Costs Likely to Impact Profits

Hasbro’s initiatives including product launches and shift toward more technology-driven toys will revive sales. However, costs related to those initiatives might hurt the company in the near term. Hasbro's cost of sales, as a percentage of net revenues, increased 100 bps to 41.8% in the third quarter. Meanwhile, overall operating margin contracted 10 bps year over year.

Hasbro, Inc. Price, Consensus and EPS Surprise

What Does the Zacks Model Says?

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hasbro has an Earnings ESP of -3.47% and a Zacks Rank #4, a combination that suggests that the company is unlikely to beat estimates this quarter.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to come up with an earnings beat in the to-be-reported quarter:

SeaWorld (SEAS - Free Report) has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is scheduled to report quarterly numbers on Feb 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Planet Fitness, Inc. (PLNT - Free Report) has an Earnings ESP of +11.86% and a Zacks Rank #2.

Penn National (PENN - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Feb 7.

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