Hasbro (HAS) Q2 Earnings Outperform Estimates, Rise Y/Y

Hasbro Inc. (NASDAQ:HAS) posted robust second-quarter 2016 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate.

Earnings and Revenue Discussion

Earnings of 41 cents per share beat the Zacks Consensus Estimate of 39 cents by 5.1% and surged 24.2% year over year.

Hasbro's net revenue of $878.9 million also soared 10.2%. Excluding a negative $17.7 million impact from foreign exchange, revenues were up 12%. Moreover, revenues beat the Zacks Consensus Estimate of $876 million by 0.3%. Notably, revenues improved at all four of its product segments category -- Games, Girls, Boys and Preschool -- on a year-over-year basis.

Hasbro's cost of sales ratio decreased 40 basis points (bps) to 36.6%. Meanwhile, selling, distribution and administration expenses and royalty expense ratio inched up 50 bps and 70 bps, respectively. Operating profit grew 12.4% year over year to $84.9 million, due to higher revenues.

Behind the Headline Numbers

The Boys category posted revenue growth for the tenth consecutive quarter. Sales came in at $355.1 million, up 4.3% year over year, bolstered by improvement in the Nerf and Star Wars brands. The Yokai Watch brand also drove the segment’s sales.

Preschool revenues climbed 4.9% to $123.9 million, backed by growth in the Play-Doh brand.

Games revenues inched up 7.6% to $227.7 million. Growth in Duel Masters, Yahtzee and Pie Face, Simon and Bop-It brands boosted the quarter’s sales.

The Girls category recorded a 35.1% year-over-year rise in revenues to $172.3 million. Notably, the segment witnessed growth for the second successive quarter, thereby marking a turnaround after prior five consecutive quarterly declines. Growth was mainly driven by Hasbro’s Disney Princess and Frozen fashion and small dolls. Additionally, Disney’s Baby Alive brand too supported sales in the quarter.

Regionally, net revenue from the U.S. and Canada segment soared 10.6% to $425.9 million supported by growth in the Boys, Girls and Games categories, partly offset by the dip in Preschool revenues. The segment reported operating profit of $58 million, reflecting a 23.1% year-over-year surge.

International revenues were $401.1 million, up 10.6%. Notably, growth in the Boys, Girls and Preschool categories more than offset a dip in the Games revenues. While revenues declined in Latin America and Asia Pacific, sales in Europe registered an increase. International operating profit was $29.7 million, up 16.9% year over year.

Entertainment and licensing segment revenues improved 9% year over year to $51.9 million, on the back of growth in Consumer Products and Digital Gaming. The segment's operating profit escalated 86.5% to $13.8 million.

Zacks Rank & Stocks to Consider

Hasbro carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader consumer discretionary sector include Boyd Gaming Corp. (NYSE:BYD) , Melco Crown Entertainment Ltd. (NASDAQ:MPEL) and MGM Resorts International (NYSE:MGM) . All three stocks carry a Zacks Rank #2 (Buy).

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