In an intensely competitive Toys - Games – Hobbies industry, Hasbro, Inc. (HAS - Free Report) has done exceedingly well and emerged as an attractive investment option. This is quite evident from the company’s performance so far in the year. In the said period, the stock has surged 42.2% compared with the industry’s rally of 12.7% and the S&P 500 gain of 14.2%.
Hasbro also has a long-term impressive earnings growth rate of 10.7%.
Year to date, stocks such as Mattel, Inc. (MAT - Free Report) , Take-Two Interactive Software, Inc. (TTWO - Free Report) and Activision Blizzard, Inc. (ATVI - Free Report) have gained 6.3%, 30.4% and 5.3%, respectively.
Let’s delve deeper and find out the reasons that have kept this Zacks Rank #2 (Buy) company ahead of its peers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Back-to-Back Impressive Results
The industry’s sales have witnessed a sharp decline over the past few quarters. However, Hasbro has defied the industry’s trend, with impressive results for the second straight quarter.
Notably, Hasbro’s top and bottom lines in second-quarter 2019 surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. Results were primarily aided by robust performance by the U.S. and Canada segment as well as the Entertainment, Licensing and Digital segment. The company also witnessed growth in Europe and Asia Pacific.
The Zacks Consensus Estimate for the current-quarter and year has increased 18 cents and 20 cents to $4.71 and $5.31, respectively, over the past 30 days.
Growth in Emerging Markets
In addition to strengthening brands and leveraging opportunistic toy lines and licenses, the company seeks to fortify its international business by expanding into the emerging markets in Eastern Europe, Asia and Latin and South America. Emerging markets offer more opportunities for revenue growth than developed markets and have been contributing to a significant share of Hasbro’s revenues, given its investments in advertising and other brand-building efforts.
Despite difficult operating conditions in some key markets, Hasbro’s emerging brands’ revenues (excluding Fx impact) have increased consistently since 2012. In the second quarter of 2019, emerging brands’ revenues increased 28% year over year, following a 22% gain in first-quarter 2019. Emerging brand revenues surged in all three operating segments.
We expect the overall positive scenario to continue in 2019. Over the next few years, Hasbro expects emerging markets to grow in double digits backed by innovation in products, entertainment and market share gains.
Sales Boosting Efforts
Hasbro is consistently investing in innovations. To enhance storytelling and content capabilities, the company partnered with Paramount. It also invested in Boulder Media — the company’s animation studio — and increased digital capacities to drive sales.
Additionally, Hasbro continues to release Transformers Franchise in all forms of entertainment including movies, television and digital expressions. Given the company’s several innovative and productive plans for Transformers franchise over the next 10 years, revenues are expected to grow significantly.
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