Hasbro (HAS): Long-Term Prospects Bright, Risks Prevail

On Aug 16, we issued an updated research report on Hasbro Inc. (NASDAQ:HAS) , a worldwide leader in children's and family leisure time and entertainment products and services.

The company posted robust second-quarter 2016 results on Jul 18, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Growth Prospects

Despite the currency headwinds, the company’s earnings and revenues surpassed the Zacks Consensus Estimate in all the trailing-six quarters on the back of consistent efforts to establish its presence worldwide through strategic partnerships and rapid growth in emerging markets.

Moreover, various initiatives undertaken by the company to boost sales along with a strong product line-up, which includes its core brands, licensed brands and lucrative product associations, should drive growth.

Notably, the Boys segment posted revenue growth for the tenth consecutive quarter in the second quarter of 2016 and is expected to continue witnessing strong growth through the remainder of 2016.

Hasbro is also ramping up its digital gaming efforts as the market has strong growth prospects. Recently, Hasbro acquired Dublin-based animation company Boulder Media, following which Hasbro will have its own in-house animation studio, which will allow it to reach out to a larger audience in a cost effective manner. Further, agreements with leading game publishers are helping Hasbro establish its presence in the digital gaming/casual entertainment category.

Risks

Although Hasbro is making efforts to boosts sales, all its brands have not been able to reap the benefits yet. Weak performances at some of its brands like Furby, My Little Pony, Playskool Heroes are offsetting growth from the performances of other counterparts. Further, an increase in costs related to initiatives undertaken to boost its business is likely to keep profits under pressure.

Meanwhile, though the Girls segment marked a turnaround in the first half of 2016 after a dreadful 2015, it remains to be seen if it can maintain its performance going ahead.

Moreover, apart from battling a broad array of alternative modes of entertainment like video games, MP3 players, tablets and smartphones, Hasbro continues to face stiff competition from toy companies like JAKKS Pacific, Inc. (NASDAQ:JAKK) and Mattel, Inc. (NASDAQ:MAT) .

Hasbro currently has a Zacks Rank #3 (Hold). A better-ranked stock in this sector is Activision Blizzard, Inc. (NASDAQ:ATVI) , with a Zacks Rank #2 (Buy).

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