Why Is Hasbro (HAS) Up 2.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Hasbro (HAS). Shares have added about 2.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hasbro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Hasbro Q1 Earnings Miss Estimates, Revenues Surpass

Hasbro reported mixed first-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top line surpassed the consensus mark for the fourth consecutive quarter. Although the top line increased from the prior-year quarter’s levels, the bottom line declined on a year-over-year basis.

Earnings & Revenues

During the fiscal first quarter, the company reported adjusted earnings of 57 cents per share, missing the Zacks Consensus Estimate of 67 cents. In the prior-year quarter, the company had reported adjusted earnings of $1 per share.

In the quarter under review, net revenues of $1,163.1 million beat the consensus mark of $1,145 million. The top line rose 4% on a year-over-year basis. The upside was backed by solid brand performances, including Magic: The Gathering, My Little Pony, Peppa Pig and Hasbro products for the Marvel portfolio.

Brand Performances

During the fiscal first quarter, the Franchise Brand reported revenues of $543.1 million, up 4% year over year. During the quarter, Partner Brands’ revenues increased 10% year over year to $206.5 million.

Revenues at Hasbro Gaming amounted to $143.6 million, up 5% from the prior-year quarter’s levels. The total gaming category revenues rose 3.7% year over year to $378.8 million. The uptick was primarily led by growth in tabletop and digital gaming, including Dungeons & Dragons as well as games like Avalon Hill's HeroQuest and Duel Masters.

Emerging Brands’ revenues during the fiscal first quarter increased 5% year over year to $76.4 million.

Revenues from TV/Film/Entertainment dropped 0.4% year over year to $193.5 million. The segment’s revenues benefited from increased deliveries in scripted shows such as The Rookie for ABC, Graymail for Netflix; as well as the film Deepwater for Amazon and Hulu. Also, increased deliveries in unscripted shows added to the upside.

Segmental Revenues

Hasbro has three reportable operating segments: Consumer Products, Wizards of the Coast and Digital Gaming and Entertainment.

In the fiscal first quarter, net revenues in the Consumer Products segments increased 3% year over year to $672.8 million. Adjusted operating margin came in at 2.8% compared with 4.9% reported in the prior-year quarter. During the quarter, the segment’s adjusted EBITDA came in at $48.8 million compared with $65.9 million reported in the prior-year quarter.

During the quarter under review, the Wizards of the Coast and Digital Gaming segment’s revenues totaled $262.8 million, up 9% from $242.2 million reported in the year-ago quarter. The segment benefited from the robust performance of Magic: The Gathering and Dungeons & Dragons as well as licensed digital gaming. The segment’s adjusted operating margin came in at 40.5% compared with 45.4% reported in the year-ago quarter. During the quarter, the segment’s adjusted EBITDA came in at $112.2 million compared with $114.9 million reported in the prior-year quarter.

Revenues in the Entertainment segment increased 4% year over year to $227.5 million. The segment’s adjusted operating margin came in at 9.2% compared with 19.2% reported in the prior-year quarter. During the quarter, the segments adjusted EBITDA came in at $31.4 million, compared with $72.3 million reported in the prior-year quarter.

Operating Highlights

During the fiscal first quarter, Hasbro's cost of sales (as a percentage of net revenues) came in at 28.6% compared with 26% in the prior-year quarter. Selling, distribution and administration expenses — as a percentage of net revenues — came in at 26.4% compared with 25.9% reported in the prior-year quarter.

During the quarter, the company reported adjusted EBITDA of $192.1 million compared with $252 million reported in the prior-year quarter.

Balance Sheet

Cash and cash equivalents as of Mar 27, 2022, were $1,057.9 million compared with $1,430.4 million on Mar 28, 2021. At the end of the reported quarter, inventories totaled $644.3 million compared with $429.2 million in the year-ago period. As of Mar 27, 2022, long-term debt came in at $3,737.9 million compared with $4,674.1 million as of Mar 28, 2021.

The company announced a hike in its quarterly dividend payout. The company raised its quarterly dividend by 3%, which indicates its intention to utilize free cash to boost shareholders’ returns. The company raised the quarterly dividend to 70 cents per share (or $2.80 annually) from the previous payout of 68 cents (or $2.72 annually). The hiked dividend will be paid out on May 16, 2022, to shareholders on record as of May 2, 2022.

During the first-quarter of fiscal 2022, the company paid out cash dividends worth $94.5 million.

Outlook

For fiscal 2022, the company anticipates revenue to grow at a low-single-digit rate and operating profit growth at a mid-single-digit rate. For fiscal 2022, the company expects achieving an adjusted operating profit margin of 16%. Operating cash flow is anticipated in the range of $700-$800 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -9.21% 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. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 #3 (Hold). We expect an in-line return from the stock in the next few months.

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