MAT Mattel Inc

Pawtucket, Rhode Island-based Hasbro Inc. (HAS) recently announced that it has inked a deal with LeapFrog Enterprises Inc (LF) to license Hasbro Studios’ animated TV shows. Hasbro Studios is the Los Angeles-based production division of Hasbro that develops and produces television programs based on Hasbro's brands.

Financial terms of the deal were not disclosed. Per the agreement, Hasbro Studios popular shows like “My Little Pony Friendship is Magic", "The Adventures of Chuck and Friends" and "Pound Puppies” will be available through LeapFrog’s App Center.

Emeryville, California-based LeapFrog is an educational entertainment company. LeapFrog designs, develops and markets technology-based learning products and related content for educating infants and children worldwide. We believe that the deal will be beneficial for Hasbro as it will widen the reach of its product. Moreover, the toy company will continue to provide LeapFrog with additional content through LeapFrog App Center.

Hasbro remains well positioned for future growth given its strong product line up, lucrative product associations with popular motion pictures as well as aggressive penetration into the emerging markets. The company is generating solid growth out of popular items such as Transformers toy lines. Moreover, Lucasfilm and FOX announced that the company’s massively popular Star Wars Saga would be converted to 3D, with the theatrical release of Star Wars Episode 1 and the Phantom Menace expected in 2012. From Marvel, Avengers Assembled will debut in May followed by Spiderman 4 in July 2012. Further, the company has a strong line up of films in process including Micronauts, Ouija, CandyLand, Risk, Stretch Armstrong, Clue and Monopoly.

Additionally, the upcoming holiday season should bring good tidings for Hasbro as most of the retail companies generate a large proportion of their net revenues during this period. However, increasing input costs and wage inflation keep us cautious on the stock. Moreover, charges relating to restructuring and investment in licensing segments remain an overhang. Furthermore, the company operates in a highly competitive space. Many of its competitors including JAKKS Pacific Inc. (JAKK) and Mattel Inc. (MAT) are also entering into pacts to expand their footprints.

Hasbro currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term “Neutral” recommendation on the stock.

 
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