Hasbro (HAS) Down 7.8% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Hasbro, Inc.HAS . Shares have lost about 7.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is HAS due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Fourth Quarter 2017 Results

Hasbro posted mixed fourth-quarter 2017 results, with earnings surpassing the Zacks Consensus Estimate and revenues lagging the same.

Adjusted earnings of $2.30 per diluted share surpassed the consensus mark of $1.82 by 26.4%. Earnings grew 40.2% from the year-ago quarter.

Net revenues totaled $1.60 billion, missing the consensus mark of $1.75 billion. Revenues also fell 1.8% year over year.

Revenues from its Partner Brands and Europe declined in the fourth quarter which significantly affected net revenues. However, strength in the franchise brand revenues drove the top line. Management believes that product innovation and digital initiatives will help the company gain traction in 2018 and beyond.

Brand Portfolio Performances

The Franchise Brand portfolio posted revenues of $764.2 million, up 11% year over year driven by revenue growth in NERF, TRANSFORMERS, MY LITTLE PONY and MONOPOLY.

Partner Brand revenues decreased 21% to $342.9 million owing to decline in STAR WARS, YO-KAI WATCH and DISNEY FROZEN, which was partially offset by increase in BEYBLADE, MARVEL and SESAME STREET.

The Hasbro Gaming revenues declined 4% year over year to $343.3 million.

Emerging Brands revenues declined 5% year over year to $145.7 million.

Operating Highlights

Hasbro's cost of sales, as a percentage of net revenues, increased 50 basis points (bps) to 39.4%.

Meanwhile, selling, distribution and administration expenses ratio declined 220 bps and royalty expense ratio fell 60 bps.

Additionally, operating profit, as a percentage of net revenues, increased 130 bps year over year to 17%.

Balance Sheet

Cash and cash equivalents, as of Dec 31, 2017, were $1.6 billion, up from $1.3 billion as of Dec 25, 2016.

Inventories totaled $433.3 million as of Dec 31, 2017, compared with $387.7 million as of Dec 25, 2016.

Long-term debt increased to $1.7 billion as of Dec 31, 2017, from $1.2 billion as of Dec 25, 2016.

In the quarter under review, Hasbro's board of directors declared a quarterly cash dividend of 63 cents per common share. This represents an increase of 6 cents from the previous payout of 57 cents. The dividend will be payable on May 15, 2018, to shareholders of record at the close of business as on May 1, 2018.

In 2017, the company paid $277.0 million in cash dividends to shareholders and repurchased 1.58 million shares of common stock at a total cost of $150.0 million and an average price of $94.74 per share. At the end of 2017, $178 million was available under the current share repurchase authorization.

2017 Highlights

Net revenues in 2017 increased 4% year over year to $5.21 billion. Adjusted net earnings were $5.46 per diluted share, up from $4.46 in 2016.

In 2017, U.S. and Canada segment net revenues increased 5% to $2.69 billion from a year ago. The segment's operating profit declined 2% to $509.9 million due to increased advertising as well as higher bad debt expense related to the Toys "R" Us bankruptcy filing.

International segment net revenues increased 2% to $2.23 billion from 2016. The segment's revenues included a favorable $75.3 million impact from foreign exchange. On a regional basis, Europe net revenues decreased 2%, Latin America increased 5% and Asia Pacific increased 12% year over year. Emerging markets net revenues increased 5% in the year. Segment operating profit decreased 22% to $228.7 million due to higher sales allowances, advertising costs and unfavorable product mix.

Entertainment and Licensing segment net revenues increased 8% to $285.6 million from the previous year, driven by growth in consumer products and digital gaming, as well as the addition of Boulder Media. Operating profit totaled $96.4 million in the year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 14% due to these changes.

Hasbro, Inc. Price and Consensus

Hasbro, Inc. Price and Consensus | Hasbro, Inc. Quote

VGM Scores

At this time, HAS has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.


Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, HAS carries a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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