) third-quarter 2013 adjusted earnings per share of $1.31 came
ahead of the Zacks Consensus Estimate of $1.27 by 3.2% and the
year-ago level of $1.24 per share by 5.6%. Better-than-expected
top line growth combined with operating margin expansion led to
the earnings beat.
On a reported basis, including favorable tax adjustments,
restructuring charges and partial pension settlement charges, the
company posted earnings per share of $1.46, up 17.7% year over
Hasbro's net revenue of $1.37 billion grew 2% from the year-ago
quarter and beat the Zacks Consensus Estimate of $1.34 billion by
2.2%. Growth in the Girls and Games categories somewhat offset by
persistent weakness in the Boys Category, which accounts for
about one third of total revenue. Revenues include a positive
$3.8 million impact from currency translation.
Behind the Headline Numbers
Hasbro's product segments comprise Girls, Games, Boys and
category revenues grew 6% to $387.4 million. Brands like Magic:
The Gathering, Jenga and Elefun & Friends performed well in
the reported quarter.
category surged 29.0% year over year to $388.7 million. Products
such as The Furby and My Little Pony supported revenue growth.
category revenues dipped 2% to $202.2 million. Higher sales of
Play-Doh Sesame Street and Transformers Rescue Bots products
could not offset the downward drift in category sales.
Despite decent performance of the Transformers and Star Wars
category plunged 17% to $392.0 million as quite a few brands
including Marvel and Beyblade continued to face tough
Segment-wise, net revenue from the
U.S. and Canada
segments declined 5% year over year to $735.6 million owing to
reduced sales in the Boys and Preschool categories. The segment's
operating profit also declined 5.0% to $147.0 million.
Despite favorable foreign currency translation, net revenue at
segment grew 11% $582.7 million. Revenues in the International
segment reflect a tailwind from all three segments --
Asia-Pacific (up 17%), Europe (up 9%) and Latin America (14%).
The segment's operating profit was up 24% to $105.7 million from
the year-ago level.
Entertainment and Licensing
segment revenues increased 13.0% year over year to $48.6 million,
driven by increased entertainment revenues as well as addition of
Backflip Studios to the segment. The segment's operating profit
plummeted 29% to $7.6 million on a year-over-year basis.
Hasbro's cost of sales ratio declined 210 basis points (bps). Its
selling-distribution-administration expenses ratio escalated 90
bps while there was a 30 bps decline in royalty expenses.
Advertising expenses were flat year over year. Product
development ratio was up 70 bps. All these led to an operating
margin expansion of 40 bps to 19%.
During the third quarter of 2013, Hasbro bought back 643,559
shares of common stock for $30.0 million. Presently, shares worth
$541.8 million remain available for further repurchase.
Hasbro managed to beat both top and bottom line estimates after
posting inconsistent results over the past few quarters. Sales
growth in all three geographic segments of the International
division deserves a special mention. The company's restructuring
initiatives also seem to have paid off.
However, the Boys products segment, which was once a powerhouse
brand of the company has been a laggard for quite some time. The
performance of the preschool category was also not up to the
mark. Faltering consumer confidence prior to the all important
holidays season is also another cause of concern.
We would prefer to remain on the sidelines at the current level
till there is further clarity on the aforesaid issues. Hasbro
currently carries a Zacks Rank #4 (Sell).
One of Hasbro's peers,
), which reported last week, beat both the top- and bottom-line
estimates in the third quarter.
Two other toy companies,
Jakks Pacific Inc.
LeapFrog Enterprises Inc.
) are likely to report its earnings on Oct 23 and Nov 4,
HASBRO INC (HAS): Free Stock Analysis Report
JAKKS PACIFIC (JAKK): Free Stock Analysis
LEAPFROG ENTRPS (LF): Free Stock Analysis
MATTEL INC (MAT): Free Stock Analysis Report
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