Toymaker Hasbro Posts Better-Than-Expected Q3 Earnings; Target Price $94

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.

Executives’ Comments

“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.

Analyst Comments

“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.”

Check out FX Empire’s earnings calendar

Hasbro Breaks Down After Earnings Miss

Hasbro, Inc. (HAS) shares plunged 7.41% Monday after the toy and boardgames maker missed Wall Street’s top- and bottom-line expectations. The Rhode Island-based company reported second-quarter (Q2) adjusted earnings of 2 cents per share, falling well short of analysts’ forecast of 19 cents per share. The figure also contracted 96% from the year-ago quarter. Meanwhile, revenue of $860.3 million in the period came in below the consensus mark of $983 million and declined 29% year-over-year (YoY).

CEO Brian Goldner cited COVID-19-related disruptions to the company’s supply chain and the closures of retailers selling its toys as contributing factors to the disappointing quarterly result. Still, he sees things improving in the second half. “We believe the outlook improves from here,” Goldner told investors during the conference call, per Barron’s. The CEO also believes the reopening of the television, film, and entertainment industries position the company for a good holiday season.

As of July 28, the company has a market capitalization of $9.84 billion, offers an enticing 3.51% dividend yield, and is down 30.69% on the year. From a valuation standpoint, the stock trades at 22.37 times projected earnings, 14% above its five-year average multiple of 19.58 times.

Balance Sheet Position

Even though Hasbro’s cash position has decreased slightly from a year ago, it still has a stockpile of $1.04 billion and access to a $1.5 billion credit facility to help navigate challenges in the months ahead. The company’s long-term debt has risen to $4.8 billion from $1.7 billion, with $300 million due in May 2021.

Wall Street View

Wells Fargo analyst Timothy Conder told clients Monday that he believes the earnings and revenue miss will erase some of the stock’s recent gains. However, Street ratings indicate further upside. The stock receives 10 ‘Buy’ recommendations, 1 ‘Overweight’ recommendation, and 6 ‘Hold’ recommendations. Moreover, analysts have placed an $86.69 12-month price target on the stock, indicating a 12% upside from Monday’s $77.59 close.

Technical Outlook

After making an impressive recovery throughout March and April, Hasbro shares have oscillated within a symmetrical triangle. Yesterday’s earnings miss saw sellers rush for the gates, with price breaking down below the pattern’s lower trendline on above-average volume. Furthermore, the moving average convergence divergence (MACD) indicator crossed below its trigger line to generate a sell signal. In the weeks ahead, look for a possible test of $62.50, where price finds support from the mid-May swing low. Conversely, a reversal back to the upside could drive a move back to significant overhead resistance around $94.

Hasbro, Inc. (NASDAQ:HAS) Falls 8% On Disappointing Q1 Financial Results

Hasbro, Inc. (NASDAQ:HAS) shares fell 8% after the company reported first-quarter financial results that fell short of Wall Street expectations. The company posted a 16% decline in net revenues that came in at $716.3 million, compared to $849.7 million reported last year.

Q1 Financial Results

Net revenues in Canada and the U.S dropped 19% to $364.3 million, compared to $451.6 million reported a year earlier. The segment also reported a net operating loss of (-$23.4) million compared to an operating profit of $64.8 million, reported in the first quarter of last year. International segment revenue came in at $287.9 million compared to $345.3 million as of last year

The company recorded lower than expected revenue in the quarter partly because of a loss of revenue from Toys“R” Us in the U.S and Europe. The Toy store underwent liquidation in the quarter a move that has affected its operations in key markets.

Overall Hasbro plunged into a net loss of (-$112.5) million or $0.90 a share in the quarter, compared to net earnings of $68.6 million reported a year earlier.

Despite the Q1 disappointment, Hasbro says it is on course to generate between $600 million and $700 million in operating free cash flow before the end of the year. Operating profit margin, on the other hand, is expected to be in line with 2017 levels of 15.6%, excluding expenses associated with Toys“R” Us.

Hasbro expects the first-quarter headwind’s to be over by the end of the first half of the year. The management expects the company to bounce back to growth in 2019, having issued impressive operating margin figures for the full year.

“Hasbro brands are resonating with consumers, and consumer takeaway is positive. However, as we discussed earlier in the year, our first quarter was expected to be difficult. We are working to put the near-term disruption from Toys“R” Us behind us,” said Brian Goldner, Hasbro’s chairman and chief executive officer.

Shareholder Value Return

Hasbro paid $70.8 million in cash dividends in the first quarter further affirming its credential when it comes to the generation of shareholder value. The company has already scheduled a $0.63 dividend payment to be paid to shareholders on May 15, 2018.

In addition, the company repurchased 427,000 shares of common stock in the quarter for a total cost of $38.8 million, at an average price of $90.81 a share. The company still has about $19.2 million remaining in its current share repurchase authorization.

According to the Chief Executive Officer, the company’s financial strength is sound which should allow it to navigate the near-term challenges with ease. The first quarter revenue and profits according to the executive were negatively impacted by events that do not reflect the health of the company’s underlying health.

In a bid to reinvigorate growth in bottom line Hasbro plans to venture into media content through partnerships with the likes of Walt Disney Co (NYSE:DIS) as a way of backing the toys the business.