Hasbro (HAS) Up 9.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Hasbro (HAS). Shares have added about 9.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hasbro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hasbro Q2 Earnings and Revenue Miss Estimates, Decline Y/Y
Hasbro, reported second-quarter 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Notably, both the top and bottom lines missed the consensus estimate for the second straight quarter.
The company reported adjusted earnings of 2 cents per share, missing the Zacks Consensus Estimate of 19 cents. In the prior-year quarter, the company had reported adjusted pro forma net earnings of 54 cents per share.
In the quarter under review, net revenues were $860.3 million, which lagged the consensus mark of $983 million. Moreover, the top line declined 12.6% year over year. On a pro forma basis, net revenues plunged 29% year over year.
Brand Performances (On PRO Forma Basis)
The Franchise Brand reported revenues of $376.8 million, down 35% year over year.
Partner Brands’ revenues declined 35% from the prior-year quarter to $138.2 million.
Revenues at Hasbro Gaming amounted to $137 million, reflecting an improvement of 11% from the prior-year period. JENGA, CONNECT 4, BATTLESHIP, MOUSETRAP and TWISTER drove the segment’s revenues. However, its total gaming category revenues decreased 19% to $319 million.
Emerging Brands’ revenues slumped 29% year over year to $76 million.
Meanwhile, revenues from TV/Film/Entertainment declined 32% year over year to $132.2 million.
Segmental Revenues (On Pro Forma Basis)
Regionally, net revenues at the U.S. and Canada segment fell 30% to $359.7 million in the quarter. Moreover, operating margin decreased to 6.8% from the prior-year quarter’s figure of 20.9%. The segment’s growth was hurt by coronavirus-induced store closure, product shortages and lower retail inventories. However, both pure play and omni-channel grew in the quarter under review.
The International segment’s revenues amounted to $249.8 million, which declined 34% year over year. The segment’s operating margin came in at negative 10% against 3.9% reported in the year-ago quarter. The segment’s results in the quarter were impacted by dismal performance of European, Asia Pacific and Latin American regions. Moreover, coronavirus-induced store closure, product shortages and lower retail inventories hurt international segment.
Meanwhile, revenues at the Entertainment, Licensing and Digital segment — which was named Entertainment and Licensing earlier — decreased 7% year over year to $89.8 million. The segment revenues were impacted by dismal digital gaming revenues. Moreover, the segment’s operating margin increased to 31% from the prior-year quarter’s figure of 8.2%.
The newly formed eOne segment reported revenues of $160.9 million, down 30% year over year. The downside can be attributed to shutdowns of live action productions and theaters globally owing to the coronavirus pandemic. Moreover, the segment’s operating margin came in at negative 3.7%, compared with a negative 11.9% in the prior-year quarter.
Hasbro's cost of sales, as a percentage of net revenues, increased to 29.4% from 26.2% in the prior-year quarter. Selling, distribution and administration expenses — as a percentage of net revenues — were 32.7%, compared with 25.2% in the prior-year quarter.
Cash and cash equivalents as of Jun 28, 2020 were $1,038.1 million, down from $1,151 million on Jun 30, 2019. The company’s $1.5 billion revolving credit facility is also available. At the end of the reported quarter, inventories totaled $564.2 million compared with $564.8 million in the comparable year-ago period. As of Jun 28, 2020, long-term debt increased to $4,802.5 million from $1,695.8 million from Jun 30, 2019. The company’s next major debt maturity is $300 million in May 2021.
The company is also committed to paying dividends. During the second quarter, the company paid divided worth $93.1 million. The company’s next dividend of 68 cents, will be payable on Aug 17, 2020 to shareholders of record at the close of business as of Aug 3.
The company anticipates the coronavirus pandemic to continue hurting every aspect of business from shipments to brick-and-mortar sales to delivery of content to meet demand. Notably, China, which represents nearly 55% of the company’s manufacturing productions, is currently operating at normal levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Hasbro has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hasbro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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