Hasbro (HAS) Up On Q4 Earnings Beat, Star Wars Demand Strong

Hasbro, Inc. (NASDAQ:HAS) reported mixed fourth-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Following the quarterly results, shares of the company improved almost 10% during the pre-market trading session.

It reported adjusted earnings of $1.24 per share, beating the Zacks Consensus Estimate of 89 cents. However, the bottom line declined 6.8% from year-ago reported figure of $1.33 per share.

In the quarter under review, net revenues came in at $1,428 million, which lagged the consensus mark of $1,453 million but improved 2.8% year over year. The upside can primarily be attributed to robust demand for Hasbro's products for Disney's Frozen 2 and Star Wars.

Brand Performances

The Franchise Brand reported revenues of $661.9 million, down 9% year over year. Revenues increased in Magic: the Gathering, Monopoly and Transformers but were more than offset by declines in Nerf, My Little Pony and Baby Alive.

Partner Brands’ revenues surged an impressive 50% from the prior-year quarter to $408.5 million owing to Marvel's Avengers and Spider-Man franchises, and Disney's Descendants 3. Star Wars revenue growth was strong in the fourth quarter. Partner Brands grew in the U.S. and Canada, and International segments.

Revenues at Hasbro Gaming amounted to $246.5 million, reflecting fall of 8% from the prior-year period. Revenues increased from Dungeons & Dragons and other games, which were offset by declines in Pie Face and Speak Out. Moreover, its total gaming category decreased 7.7% to $442.1 million.

Meanwhile, Emerging Brands’ revenues decreased 7% year over year to $111.1 million.

Segmental Revenues

Regionally, net revenues at the U.S. and Canada segment rose 3% to $682.4 million in the quarter. Moreover, operating margin contracted 30 basis points (bps) from the prior-year quarter to a negative 14.9%.

The International segment’s revenues amounted to $615.1 million, which declined 1% year over year. The segment’s operating margin came in at 9.1% compared with 4.7% reported in the year-ago quarter.

Meanwhile, revenues at the Entertainment, Licensing and Digital segment — which was named Entertainment and Licensing earlier — improved 19% year over year to $130.2 million. Moreover, the segment’s operating margin increased to 28.5% from negative 42.8% in the prior-year quarter.

Operating Highlights

Hasbro's cost of sales, as a percentage of net revenues, contracted 290 bps to 40.4%. Selling, distribution and administration expenses — as a percentage of net revenues — were 20.2%, compared with 31.2% in the prior-year quarter.

Hasbro, Inc. Price, Consensus and EPS Surprise

Balance Sheet

Cash and cash equivalents as of Dec 29, 2019 amounted to $4,580.4 million, up from $1,182.4 million on Dec 30, 2018. At the end of the reported quarter, inventories totaled $446.1 million compared with $443.4 million in the comparable year-ago period. As of Dec 29, 2019, long-term debt increased to $4,046.5 million from $1,695.1 million from Dec 30, 2018.

Hasbro’s board of directors declared a quarterly cash dividend of 68 cents per common share. The dividend will be payable on May 15, 2020 to shareholders of record at the close of business as of May 1.

In fourth-quarter 2019, the company repurchased 702,125 shares of common stock at an average price of $87.41 per share for $61.4 million. At the end of the fourth quarter, $366.6 million was available under the current share repurchase authorization.

Hasbro, which shares space with Mattel, Inc. (NASDAQ:MAT) , JAKKS Pacific, Inc. (NASDAQ:JAKK) and Activision Blizzard, Inc. (NASDAQ:ATVI) , has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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