Hasbro (HAS) brand strength sees earnings top expectations

April 24, 2024 6:38 AM EDT
(Updated - April 24, 2024 9:24 AM EDT)

Hasbro (NASDAQ: HAS) reported a stronger-than-expected first quarter of 2024 today, with earnings and revenue surpassing analyst estimates.

The company's adjusted earnings per share (EPS) came in at $0.61, significantly higher than the $0.28 consensus. Revenue also beat expectations at $757.3 million, compared to the predicted $749.48 million. Following the announcement, Hasbro's shares rose over 9% premarket, indicating a positive investor response to the earnings and revenue beat.

Despite the overall revenue decline of 24% from the previous year, due primarily to the eOne film and television divestiture, the company saw growth in its Wizards of the Coast and Digital Gaming segment by 7% and Entertainment by 65%. However, these gains were offset by a 21% decrease in Consumer Products. Excluding the divestiture, revenue fell by 9%. The company's operating profit reached $116.2 million, with an operating margin of 15.3%. Adjusted operating profit saw a significant increase to $148.6 million, which is $101.4 million higher than the previous year, and the adjusted operating margin improved to 19.6%.

Hasbro CEO Chris Cocks attributed the quarter's success to the strength of the company's brands and its ongoing transformation efforts, stating, "Performance from our licensing portfolio shows the strength of our brands and we continue to fuel innovation in games and toys as we expand our reach across play patterns to fans of all ages." CFO Gina Goetter highlighted the company's solid progress in its turnaround efforts, with revenue landing as expected and a significant improvement in operating profit, driven by the operational excellence program and improved business mix.

For the full year, Hasbro maintains its annual guidance, expecting Consumer Products Segment revenue to be down 7% to 12%, Wizards of the Coast Segment revenue to decrease by 3% to 5%, and the Pro-Forma Entertainment segment revenue to be down $15 million. The company aims for an adjusted operating margin of approximately 60% and an adjusted EBITDA of $925 million to $1 billion.

The positive earnings news was further bolstered by the announcement that Hasbro paid $97.2 million in dividends to shareholders during the quarter and plans to continue returning cash through dividends while paying down debt to reach its leverage target.

Investors' confidence seemed bolstered by the company's cost-saving initiatives and its commitment to investing in its core business, as reflected in the stock's upward movement.

Reacting to the report, analysts at JPMorgan maintained their Neutral rating on the stock but said overall, it was "a good quarter that adds credibility to the cost optimization program," with the
"easy inventory clearance laps suggesting strong upside to the guidance for the year, which was maintained, as expected."

Meanwhile, Goldman Sachs also kept a Neutral rating on HAS. The investment bank said: "We expect shares of Hasbro will trade higher today on the back of better than expected Revenue and Adjusted Operating Profit trends against a backdrop of broader top line concern for both the toy industry and Hasbro specifically, which is in the middle of a significant business transformation."

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