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Hasbro (HAS) Down 4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
In the latest trading session, Oasis Midstream Partners LP (OMP) closed at $21.76, marking a +0.05% move from the previous day.

A month has gone by since the last earnings report for Hasbro (HAS). Shares have lost about 4% 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’s Earnings and Revenues Surpass Estimates in Q1

Hasbro reported robust first-quarter 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.  Adjusted earnings of 21 cents per share surpassed the Zacks Consensus Estimate of a loss of 8 cents. In the prior-year quarter, the company had reported earnings of 10 cents per share.

Net revenues totaled $732.5 million, which outpaced the consensus estimate of $674 million. The top line also increased 2% from the prior-year quarter. The upside was primarily driven by robust performance of the U.S. and Canada segment as well as Entertainment, Licensing and Digital segment.

Brand Performances

The Franchise Brand posted revenues of $393.6 million, up 9% year over year. Notably, increase in sales at MAGIC: THE GATHERING, MONOPOLY, PLAY-DOH and TRANSFORMERS drove the brand revenues. Franchise Brand revenues also improved at the U.S. and Canada, and Entertainment, Licensing and Digital segments.

Partner Brands’ revenues slumped 14% to $172 million due to a decline at most of its brands. Apart from the United States and Canada segment, Partner Brand revenues declined at the International segment.

The Hasbro Gaming revenues came in at $107.6 million, which increased 2% on a year-over-year basis. Robust performances by DUEL MASTERS, CONNECT 4 and TWISTER drove the brand revenues. Hasbro Gaming revenues increased in the U.S. and Canada, and International segments. Notably, Hasbro’s total gaming category surged 20% to $243.4 million.  

Meanwhile, Emerging Brands’ revenues increased 22% year over year to $59.4 million.

Segmental Revenues

Regionally, net revenues at the U.S. and Canada segment rose 1% to $357.9 million. The segmental performance was driven by growth at Franchise Brands, Hasbro Gaming and Emerging Brands, which overshadowed decline in Partner Brands. Moreover, operating profit margin was 3.8% compared with negative of 7.5% in the prior-year quarter.

The International segment’s revenues summed $282.6 million, down 2% year over year. The decline was primarily due to dismal performance of Partner Brands, which overshadowed growth in Hasbro Gaming and Emerging Brands. The segment’s operating margin came in at negative of 10.8% compared with negative of 19.5% in the prior-year quarter.

Meanwhile, revenues at the Entertainment and Licensing segment surged 24% year over year to $92 million. The segment operating margin expanded to 32.6% compared with 23% in the prior-year quarter.

Operating Highlights

Hasbro's cost of sales, as a percentage of net revenues, decreased 10 bps to 35.5%. Selling, distribution and administration expenses, as a percentage of net revenues, were 30.8%, a sharp decline from 45.8% in the prior-year quarter.

Balance Sheet

Cash and cash equivalents as of Mar 31, 2019, amounted to $1,196.6 million, down from $1,598.9 million as of Apr 1, 2018. At the end of the reported quarter, inventories totaled $491.8 million compared with $517.4 million in the prior-year quarter.

Long-term debt increased to nearly $1,695.5 million as of Mar 31, 2019, from $1,694 million as of Apr 1, 2018.

Hasbro’s board of directors declared a quarterly cash dividend of 68 cents per common share. The dividend will be payable May 15, 2019, to its shareholders of record at the close of business as of May 1, 2019.

In first-quarter 2019, the company repurchased 579,174 shares of common stock at a total cost of $49.2 million. At the end of the reported quarter, $378.8 million was available under the current share repurchase authorization.

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 -5.3% due to these changes.

VGM Scores

At this time, Hasbro has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 #2 (Buy). We expect an above average return from the stock in the next few months.



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