In the past six months, shares of Hasbro, Inc. HAS have declined 18.6% compared with the industry’s fall of 5.1%. The downtrend can be primarily attributed to high costs. The company has been shouldering high expenses with respect to freight and input for quite some time.
However, increased focus on eOne content, robust performances of its gaming category and sales-building efforts bode well. Let’s delve deeper and find out the factors likely to revive this Zacks Rank #3 (Hold) stock.
Factors Likely to Drive Growth
Hasbro continues to focus on adapting plans to deliver a robust lineup of entertainment and innovation from E1 and its partners. Notably, on the content side, E1 production is gradually recovering through a new animated series on Netflix and Alien TV. The team has been witnessing solid feedback for the contents in Peppa Pig, PJ Mask and the My Little Pony feature film.
For 2022, the company estimates cash spend on content across scripted and unscripted live-action, animated TV, and film in the range of $725-$825 million. It emphasized on feature films such as Transformers: Rise of the Beasts and Dungeons & Dragons to be a driving factor for boosting revenues and operating profits in 2023. Meanwhile, the eOne team continues to develop and move into the production of Hasbro IPs of more than 200 projects in development across TV, film, and animation. The company said that the eOne team is working on more than 35 development projects for Hasbro brands, including content for TRANSFORMERS, MAGIC, D&D, PEPPA PIG, MY LITTLE PONY, POWER RANGERS and PLAY-DOH, among many others.
Hasbro is witnessing a strong gaming demand during the coronavirus crisis. Hasbro has a supreme gaming portfolio, and it is refining gaming experiences across a multitude of platforms like face-to-face gaming, tabletop gaming and digital gaming experiences on mobile. Given a strong product lineup and a greater focus on entertainment-backed products, Hasbro's Entertainment and Licensing segment is poised for growth. The company stated that it is currently investing in longer-term larger gameplay. The company's gaming category, which includes Magic: The Gathering, NERF, Peppa Pig, My Little Pony, Transformers, as well as Hasbro products for the Marvel portfolio are performing well.
In addition to growing brands and leveraging opportunistic toy lines and licenses, the company seeks to grow its international business by expanding into emerging markets in Eastern Europe, Asia, and Latin and South America. Emerging markets offer greater 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.
For fiscal 2022, the company anticipates revenue growth at a low-single-digit rate and operating profit growth at a mid-single-digit rate. For fiscal 2022, the company expects to achieve an adjusted operating profit margin of 16%. Operating cash flow is anticipated in the range of $700-$800 million.
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Some better-ranked stocks in the Consumer Discretionary sector are Hyatt Hotels Corporation H, Marriott International, Inc. MAR and Choice Hotels International, Inc. CHH.
Hyatt currently carries a Zacks Rank #2 (Buy). H stock has increased 29.9% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 78.1% and 93.9%, respectively, from the year-ago period’s reported levels.
Marriott currently carries a Zacks Rank #2. MAR has a trailing four-quarter earnings surprise of 1.4%, on average. The stock has increased 25.2% in the past year.
The Zacks Consensus Estimate for MAR’s current financial year sales and EPS indicates growth of 44.6% and 93.7%, respectively, from the year-ago period’s reported levels.
Choice Hotels carries a Zacks Rank #2, at present. CHH has a trailing four-quarter earnings surprise of 20.4%, on average. The stock has increased 2.7% in the past year.
The Zacks Consensus Estimate for CHH’s current financial year sales and EPS indicates growth of 13.6% and 17.7%, respectively, from the year-ago period’s reported levels
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