Toy maker Hasbro (HAS, Financial), which is a rival of Mattel (MAT, Financial), recently posted financial results for the third quarter of 2014 that matched the Street estimates. Its action figures such as Transformers: Age of Extinction and Marvel movies put up a great show for the company in developing markets such as the Latin America and Asia-Pacific regions. Also, continual sales for its Star Wars and Nerf toys contributed significantly to its performance for the quarter.
Results and more
The toy maker, for the third quarter, reported revenue of $1.47 billion, an uptick of 7.3% as against $1.37 billion in the same quarter a year earlier. Also, its net income for the quarter rose 43% to $180.5 million or earnings of $1.40 per share as compared to $126.6 million or earnings of $0.96 per share in the corresponding period last year. Excluding the items it earned $1.46 per share that topped the analysts’ estimates of $1.45 per share for the quarter. Analysts had been modeling earnings of $1.45 per share on the revenue of $1.47 billion for the quarter.
Looking forward, the company is executing various smart moves such as expanding its brand portfolio, global expansion of Hasbro and enhancing its content-led branded play strategy that should certainly drive growth for the company in the future. Also, Hasbro is focused on integrating its action figures to small screen that will certainly capture more attention for its toy characters going forward.
Making good moves
Hasbro already has TV joint venture with Discovery Communications (DISCA, Financial), formerly known as Hub networks. It has newly been re-named to Discovery Family Channel. Hasbro plans to use this channel extensively to promote Hasbro Studios' children content in daytime. It should also help the company better execute its programs for families in primetimes.
Hasbro has recently entered into a merchandising agreement with Walt Disney (DIS, Financial) to create dolls based on its animated movies such as "Frozen" and other Disney princess stories. This will certainly create a competitive edge for Hasbro against its peers such as Mattel. Mattel had this right so far which will soon be transferred to Hasbro, beginning in 2016. Mattel has decided to close down the production for the rights. Moreover, Mattel is also experiencing slowdown in demand for its American Girl dolls and other categories. In fact, Mattel witnessed approximately a 21% slump in its Barbie sales in the category in the fourth quarter 2014.
In contrast, Hasbro realized approximately 22% growth in the same category for its Boy Toys. Also, it is seeing strong demand for its action figures such as Nerf, Transformers and Marvel in the emerging markets such as Latin America and Asia-Pacific. The company continues to observe strong sales for its Transformers: Age of Extinction in the global market, boosted by ground-breaking new lines. Looking ahead, Hasbro is creating new content for Transformers.
Also, the company remains on track to integrate this remarkable action figure in the new television programming. Also, the company is in talks with filmmakers and plans to bring this action figure to movies that will certainly drive its growth in the long run and create value for shareholders. This action figure has already delivered approximately $1.00 billion at the global box office. Hasbro is also seeing tremendous growth potential with Magic: The Gathering.
More catalysts to consider
Hasbro has recently rolled over new releases such as Magic 2015 Core Set and of Khans of Tarkir. These releases are capturing market share for the company in home as well as in the global markets. Further, the company is investing heavily in digital and analog play for the brand through technology and storytelling that should augment its growth in the future. Hasbro should also benefit from the rollout of the reimagination of LITTLEST PET SHOP to retails. The company has seen an encouraging response from the consumers and expects this to enhance its performance in the fourth quarter and into 2015.
Meanwhile, the company is working closely with its all-screen content strategy. It is effectively building its storytelling and Omni-screen capabilities globally. It plans to create new programming for its networks and screens worldwide. The company remains on track to effectively reach the kids and families with encouraging content. Further, the company has developed tremendous expertise in creating animation. It is currently working with one of the best studios in the world in order to produce world class quality animation cost effectively.
Conclusion
Hasbro looks quite encouraging as the company is executing various strategic moves. Its relationship with Walt Disney looks pretty strong to deliver long-term growth for the company. It is also investing in the content and storytelling. The analysts have estimated CAGR of 12.43%, greater than average industry CAGR of 9.47% that indicate strong growth potential for the stock in the future. Its short-term returns are also attractive. The analysts have forecasted CAGR of 13.80% this year and 10.90% for next year.
