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Why Is Hasbro (HAS) Up 5.1% Since Last Earnings Report?

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  • HAS

It has been about a month since the last earnings report for Hasbro (HAS). Shares have added about 5.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Hasbro Q3 Earnings & Revenues Beat Estimates

Hasbro reported solid third-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The bottom line outpaced the consensus mark for the fifth straight quarter, while the top line beat the same for the second consecutive quarter.

The company reported adjusted earnings of $1.96 per share, beating the Zacks Consensus Estimate of $1.73. In the prior-year quarter, the company had reported adjusted earnings of $1.88 per share.

In the quarter under review, net revenues were $1,970 million that beat the consensus mark of $1,957 million. Moreover, the top line rose 11% on a year-over-year basis.

Brand Performances

During the fiscal third quarter, the Franchise Brand reported revenues of $882 million, up 9% year over year. The upside was backed by growth in MAGIC: THE GATHERING, MY LITTLE PONY and TRANSFORMERS.

During the quarter, Partner Brands’ revenues fell 10% year over year to $ 366.7 million. Although the brand registered growth in Hasbro products for the Marvel portfolio, it was more than offset by declines in other properties.

Revenues at Hasbro Gaming amounted to $281.9 million, up 18% from the prior-year quarter’s levels. Its total gaming category revenues increased 21% year over year to $ 658.6 million. The uptick was primarily led by growth in tabletop and digital gaming including DUNGEONS & DRAGONS as well as games such as THE GAME OF LIFE, CONNECT 4 and GUESS WHO.

Emerging Brands’ revenues during the fiscal third quarter increased 15% year over year to $177.5 million owing to growth in PJ MASKS, PEPPA PIG and GI JOE products.

Revenues from TV/Film/Entertainment surged 58% year over year to $261.9 million. The segment’s revenues benefited from increased deliveries in scripted, unscripted as well as animated television and film.

Segmental Revenues

During first-quarter fiscal 2021, the company had changed its reportable segments to Consumer Products, Wizards of the Coast and Digital Gaming and Entertainment.

In the fiscal third quarter, net revenues from the Consumer Products segments fell 3% year over year to $1,282.7 million. Adjusted operating margin came in at 16.4% compared with 17.2% reported in the prior-year quarter.

During the quarter under review, the Wizards of the Coast and Digital Gaming segment’s revenues totaled $360.2 million, up 32% from $273.4 million reported in the year-ago quarter. The segment benefited from robust performance of MAGIC: THE GATHERING and DUNGEONS & DRAGONS as well as licensed digital gaming. The segment’s adjusted operating margin came in at 44.3% compared with 51.8% reported in the year-ago quarter.

Revenues in the Entertainment segment increased 76% year over year to $ 327.1 million. The segment’s adjusted operating margin came in at 12.9% against (1.9%) reported in the prior-year quarter.

Operating Highlights

During the fiscal third quarter, Hasbro's cost of sales (as a percentage of net revenues) came in at 30.9% compared with 34.3% in the prior-year quarter. Selling, distribution and administration expenses — as a percentage of net revenues — were 18.4% compared with 18.3% in the prior-year quarter.

Balance Sheet

Cash and cash equivalents as of Sep 26, 2021 were $1,181.2 million, up from $1,132.4 million on Sep 27, 2020. At the end of the reported quarter, inventories totaled $544.1 million compared with $540 million in the year-ago period. As of Sep 26, 2021, long-term debt came in at $3,977.4 million compared with $4,777.8 million as on Sep 27, 2020.

The company’s board of directors announced a dividend of 68 cents per common share. The dividend is payable on Nov 15, 2021, to shareholders of record at the close of business as of Nov 1.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -25.97% due to these changes.

VGM Scores

Currently, Hasbro has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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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