Hasbro Reports a Mixed Bag - Analyst Blog
23 Julho 2012 - 8:19AM
Zacks
Hasbro Inc. (HAS) has reported second quarter
2012 adjusted earnings per share of 33 cents, flat year over year.
The quarter’s earnings surpassed the Zacks Consensus Estimate of 24
cents. On a GAAP basis, earnings declined 25.3% year over year to
$43.4 million in the quarter.
Hasbro’s net revenue of $811.5 million fell 10.7% from the year-ago
quarter and missed the Zacks Consensus Estimate of $829.0 million.
Foreign exchange had an unfavorable impact of $34.4 million.
The Preschool market was the main savior of quarterly revenue.
Hasbro continued to return value to investors in the form of share
repurchases and dividend distribution.
Performance Highlights
Hasbro experienced worldwide net revenue growth in only one of its
four major product categories -- Preschool -- which increased 6% to
$103.4 million, on an annualized basis. Boys, Girls and Games
categories fell 16% to $389.1 million, 13% to $104.2 million and 8%
to $213.8 million, respectively.
The Transformers and Beyblade brands in the Boys category began
seeing instability from the first quarter. After outperforming for
several quarters, the brands were flat year over year in the
preceding quarter and were the dampeners this quarter.
Geographically, net revenue from the U.S. and Canada segment
declined 19% year over year to $406.6 million, while its operating
profit registered a growth of 6% to $60.9 million. A constructive
product mix and higher quality inventory aided this profit
growth.
Net revenue at the International segment slid 4% year over year
to $360.5 million. However, excluding the adverse effect of
currency translation, revenue grew 5% in the quarter. Revenue in
the International segment reveals a tailwind from Latin America but
headwind from Europe and Asia Pacific. The segment’s operating
profit was $29.9 million, down 12% year over year.
The Entertainment and Licensing segment experienced a 59%
year-over-year surge in sales to $43.2 million. The segment’s
operating profit showed an increment to $8.2 million from $0.6
million recorded in the year-ago period.
As a percentage of net revenue, we noticed a 30 basis points (bps)
decline in Hasbro’s royalty expenses to 8.7% and 310 bps reduction
in cost of sales to 38.5%. Product development expenses were 6.2%,
up 20 bps year over year, advertising expenses increased 80 bps to
9.8% and selling, distribution and administration expenses nudged
up 10 bps to 23.6% as a percentage of net revenue. All these
culminated to an operating margin improvement of 170 bps to
10.6%.
Financials
At quarter end, total assets were $4.01 billion compared with $3.94
billion at the end of the year-earlier quarter. Hasbro’s long-term
debt was $1.40 billion, almost flat year over year.
Hasbro repurchased a total of 139,734 shares during the quarter at
a total cost of $4.9 million. At quarter-end, $217.3 million
remained available in the current share repurchase authorization.
The company spent $46.7 million in cash dividends.
Outlook
Management expects year-over-year growth in revenue and earnings
per share for 2012 excluding the impact of foreign currency
translation. Management also expects its fourth quarter revenue and
earnings per share to be higher than the third quarter.
Our Take
Hasbro’s strong product line-up slated for the second half of the
year, strategic tie-ups, and its growing presence in emerging
geographical regions bode well for future growth. The return of
operating margin growth in the U.S. and Canada was a pleasant
surprise in the quarter.
Management’s plan to shift shipments nearer to the peak buying
season in the third and fourth quarters in the U.S. should prove
beneficial. We heard a positive tone from Hasbro regarding its
Holiday initiatives.
However, we prefer to remain on sidelines at the current level
until we see any definite sign of materialization of aforesaid
initiatives. Hasbro 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. As a point of reference, one of Hasbro’s major peers
Mattel Inc. (MAT) beat the Zacks Consensus
earnings per share and revenue estimates in its second quarter
2012.
HASBRO INC (HAS): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
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