Hasbro Inc.HAS posted better-than-expected second quarter 2015 results with both earnings and revenues beating the Zacks Consensus Estimate. However, both fell year over year, primarily hurt by currency headwinds.
Earnings and Revenue Discussion
Adjusted earnings per share of 33 cents handily beat the Zacks Consensus Estimate of 29 cents per share by 13.8%. However, earnings fell 8.3% year over year due to a decline in revenues and margins and an increase in interest expenses.
Hasbro's net revenue of $797.7 million fell approximately 4% year over year. However, excluding a negative $71.5 million impact from foreign exchange, revenues increased 5%. However, revenues easily surpassed the Zacks Consensus Estimate of $781.0 million by 2.1%. While revenues at the Girls and Games categories experienced a year-over-year decline, revenues from Boys and Pre-school categories grew year over year.
Behind the Headline Numbers
Hasbro's product segments comprise Games, Girls, Preschool and Boys.
The Boys category posted revenue growth for the sixth consecutive quarter. Revenues were $340.4 million, up 1% year over year, driven by growth in Nerf, Marvel and Star Wars products and shipments of Jurassic World. However, these gains were partially offset by a decline at Transformers that faced difficult comparisons on a year-over-year basis.
Preschool category revenues surged 14% to $118.1 million due to growth in Play-Doh brand shipments of Jurassic World. However, these positives were partially offset by declines at core Playskool products.
Games category revenues fell 6% to $211.6 million mainly due to a decline in revenues at Magic: The Gathering, Duel Masters and Angry Birds. These declines, however, were partly offset by revenue gains from brands like Monopoly, Trouble, Clue and Twister.
The Girls category revenues declined 22% year over year to $117.1 million - marking the third consecutive decline. Revenue declines at Furby, My Little Pony and Nerf Rebelle were partially offset by growth in Play-Doh Dohvinci and shipments of Disney Descendants.
On a regional basis, net revenue from the U.S. and Canadasegment increased 1% to $385.2 million, thanks to growth in the Boys and Preschool categories. The segment reported operating profit of $47.1 million, approximately flat year over year.
International segment revenues were $362.8 million, down 9% year over year. On an international basis, revenue declines at the Boys, Games and Girls categories were partially offset by increases in the Preschool categories. Particularly, revenue declines in Europe and Asia were partially offset by growth in Latin America.
Excluding an unfavorable impact of foreign exchange, net revenue in the International Segment grew 9% and approximately 9% in the emerging markets. The segment reported operating profit of $25.4 million, down 13% year over year.
Entertainment and licensingsegment revenues were roughly flat year over year on entertainment-backed licensing revenues. The segment's operating profit plunged 49% year over year basis to $7.4 million.
Hasbro's cost of sales ratio declined 160 basis points (bps) to 37%. Its selling, distribution and administration expenses ratio increased 210 bps while royalty expense ratio fell 130 bps. Operating profit fell 8.6% year over year to $75.5 million due to a decline in revenues.
Hasbro carries a Zacks Rank #3 (Hold).
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