MAT Mattel Inc

Hasbro Inc. (HAS) appears all set to boost its Entertainment segment via Hasbro Studios for television and alliance with movie studios like Paramount, Universal Pictures, Sony and Relativity. Hasbro started the year on a positive note and will likely perform better in the coming quarters on a strong sales momentum from the 3D version of Star Wars, Battleship worldwide launch in April (with the U.S. launch in May), Avengers Assembled (May release) and Spiderman 4 (set to debut in July 2012). Other films in the queue are Ouija, CandyLand, Stretch Armstrong, Clue and Monopoly.

Added to this, Hasbro, in association with Paramount Pictures, was nearly ready for the big screen appearance of G.I. Joe Retaliation on June 29 this year. But the premiere has now been pushed to the next year.  To cash in on the global popularity of 3D versions, .I. Joe Retaliation will now appear in 3D suit on March 29, 2013. The strong pipeline ensures that Hasbro’s entertainment initiatives will contribute to its revenue as well as toy-sales.

However, the last moment delay of G.I. Joe Retaliation could be the result of the recent box-office underperformance of The Battleship movie in the U.S. We believe, management does not want to lose any single chance to make the recent G.I. Joe edition a huge success and seeks to go bigger with the brand. As a point of reference, the first G.I. Joe garnered sizable revenue in 2009. So far in the year, Star Wars and Avengers were flourishing in box-offices with Avengers being one of the well-accepted boys’ toys brands at the current level. Battleship delivered strong starts internationally, in particular markets like Asia and Europe.

Revenue from the Entertainment and Licensing segment increased 19% year over year to $29.3 million in first-quarter 2012 backed by the sales of television programming globally, as well as movie and  licensing revenue from Transformers. According to management, there are various strong motion picture and television entertainment backed properties doing well at retail.

For full year 2012, Hasbro reiterated its target to grow revenues and earnings per share excluding foreign exchange fluctuation. However, we are a bit doubtful about the magnitude of the growth as G.I. Joe is now out of the 2012 show. The apprehension is also reflected in the analysts’ estimate. Following the news, the Zacks Consensus Estimate for the full-year 2012 was slashed by 3 out of 11 analysts in the last 7 days while none went for any increment. Coming to magnitude of revision, the estimate was cut by 2 cents to $2.88 per share for the fiscal year.

Hasbro, which competes with the likes of Mattel Inc. (MAT), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Neutral recommendation on the stock.

 
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