Hasbro Inc, a global designer and distributor of traditional toys and game, reported a better-than-expected profit and revenue in the third quarter as parents bought their children more board games during the COVID-19 restrictions to keep them entertained.
The U.S. toymaker said its net revenues for the third quarter 2020 were $1.78 billion versus $1.86 billion pro forma revenues in 2019, a decline of 4%. That was higher than the market expectations of $1.75 billion.
Hasbro’s net earnings were $220.9 million, or $1.61 per diluted share, versus pro forma net earnings of $216.5 million, or $1.57 per diluted share, in 2019. Third-quarter 2020 net earnings included $19.6 million after-tax of purchased intangible amortization associated with the eOne acquisition, $13.7 million of incremental tax expense related to a change in the U.K. tax code and $4.7 million after-tax of acquisition and related costs, the company said.
Excluding these items, adjusted net earnings for the third-quarter 2020 were $258.9 million, or $1.88 per diluted share. That was higher than the market expectations of $1.63 per share.
“As a headline, Hasbro (HAS) delivered a solid beat in sales & EPS. The composition was different, but that’s the benefit of diversification,” said Stephanie Wissink, equity analyst at Jefferies, who gave a target price of $100 for the stock.
At the time of writing, Hasbro shares traded 9.51% lower at $83.25 on Monday; the stock is down about 20% so far this year.
“Live-action entertainment production is returning, and we are set to improve deliveries in the fourth quarter with some moving into 2021. While COVID-19 remains a factor in our global operations, consumers remain engaged in activities that create joy and personal connections and we are working purposefully to deliver them the world’s best play and entertainment experiences while remaining focused on the safety and well-being of our global teams and communities,” said Brian Goldner, Hasbro’s chairman and chief executive officer.
“Hasbro’s partner factories and warehouses are open and operating and production is largely in line with demand. With a strong focus on cash collections, DSOs are down year-over-year and sequentially, and we ended the quarter with $1.13 billion in cash on the balance sheet. Importantly, as we look to the future, we remain focused on executing a good holiday, managing our expenses and investing to support our business plans for future years,” said Deborah Thomas, Hasbro’s chief financial officer.
Hasbro Stock Price Forecast
Eight equity analysts forecast the average price in 12 months at $94.43 with a high forecast of $104.00 and a low forecast of $74.00. The average price target represents a 13.91% increase from the last price of $82.90. From those eight analysts, seven rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.
Hasbro had its stock price forecast raised by JP Morgan to $92 from $83. They currently have a neutral rating on the stock. Stifel Nicolaus upgraded shares of Hasbro from a hold rating to a buy rating and boosted their target price for the stock to $100 from $73.
Several other analysts have also recently commented on the stock. BMO Capital Markets raised shares of Hasbro from a “market perform” rating to an “outperform” rating and boosted their target price for the stock to $90 from $69. BidaskClub raised shares from a hold rating to a buy rating. At last, MKM Partners boosted their target price to $104 from $90.
“Strong POS growth for HAS in 2Q20 did not translate into revenue growth due to temporary store closures, product shortages, and retail inventory reductions. Performance should be better in 3Q20 due to: (1) reopening of production facilities outside China(45% of total); (2) a more favourable Magic the Gathering comp; (3) at least 90% of retail outlets being open globally; (4) full resumption of production at eOne in September; and (5) continuing strong industry POS,” noted equity analysts at D.A. Davidson & Company.
“We are comfortable buying the stock today and reiterate our BUY rating. Our $100 price target is under review until after the report on Monday; it is based on 21x 2021EEPS of $4.78.”
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