Hasbro Inc. HAS posted robust fourth-quarter 2016 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. Moreover, the company raised its quarterly dividend by 11.8%
Earnings and Revenues Discussion
Earnings of $1.64 per share beat the Zacks Consensus Estimate of $1.28 by 28.1% and surged nearly 18% year over year (y/y).
Hasbro’s net revenue of $1.63 billion also soared 11%. Excluding a negative $11.9 million impact from foreign exchange, revenues were up 12%. Moreover, revenues beat the Zacks Consensus Estimate of $1.51 billion by nearly 8%. Notably, revenues improved in two out of its four product segments category. While Games and Girls segment recorded a gain, revenues declined at Boys and Preschool.
Hasbro’s cost of sales ratio increased 100 basis points (bps) to 38.9%. Meanwhile, selling, distribution and administration expenses rose 180 bps and royalty expense ratio declined 190 bps. Operating profit grew almost 16% y/y to $255.2 million, due to higher revenues.
Behind the Headline Numbers
Revenues at the Games and Girls category witnessed a year-over-year growth of 11% and 52%, respectively. Meanwhile, the Preschool and the Boys category revenues deteriorated 4% and 3%, respectively, in the fourth quarter. Notably, before this, the Boys category had posted revenue growth for eleven consecutive quarters.
Hasbro’s full-year adjusted earnings of $4.46 surpassed the Zacks Consensus Estimate of $4.11 by 8.5%. In addition, it increased 27.1% from the year-ago quarter figure of $3.51. The upside reflects an increase in revenues.
Full-year revenues of $5.02 billion came above the Zacks Consensus Estimate of $4.89 billion by 2.7% and increased 13% year over year.
2016 Revenue Breakdown by Product Segments Category & Regionally
In 2016, the Boys category posted revenues of $1.85 billion, up 4% y/y, bolstered by improvement in the Nerf brand as well as increased shipments of the Yokai Watch brand.
Preschool revenues declined 1% to $589.2 million as weakness in Playskool Heroes and core Playskool items more than offset the growth in Play-Doh brand.
Games revenues inched up 9% to $1.39 billion as Hasbro’s differentiated gaming portfolio drove growth across multiple gaming formats including face-to-face gaming, off-the-board gaming and digital gaming.
The Girls category recorded a 50% year-over-year rise in revenues to a record $1.19 billion. Notably, this segment witnessed growth in each of the four quarters in 2016, thereby marking a turnaround after the five consecutive quarterly declines, previously. Growth was mainly driven by Hasbro’s Disney Princess and Disney’s Frozen fashion and small dolls, and Dreamworks’ Trolls. Additionally, Baby Alive, Furreal Friends and Easy-Bake Oven brands too supported sales in the year.
Regionally, full-year 2016 net revenue from the U.S. and Canada segment soared 15% to $2.56 billion, supported by growth in the Girls, Games and Boys categories. But the net revenues were partly offset by the dip in Preschool revenues. The segment reported operating profit of $522.3 million, reflecting a surge of 21% y/y.
International revenues were $2.19 billion, up 11% y/y supported by growth in all the four product categories: Boys, Girls, Games and Preschool. Increase in sales were registered in Europe, Latin America, Asia Pacific and Emerging markets. International operating profit was $294.5 million, up 15% from a year ago.
Entertainment and licensing segment revenues improved 8% y/y to $265.2 million, on the back of growth in Consumer Products and Digital Gaming, as well as the addition of Boulder Media. However, the segment’s operating profit decreased 35% to $49.9 million.
The board of directors announced an 11.8% increase in the quarterly dividend from 51 cents to 57 cents per share, payable on May 15, 2017 to shareholders of record, as of May 1, 2017. This adds up to an annual dividend of $2.28, representing a dividend yield of nearly 3%.
Hasbro, Inc. Price, Consensus and EPS Surprise
Hasbro, Inc. Price, Consensus and EPS Surprise | Hasbro, Inc. Quote
Change in Reporting
Notably, beginning with the first quarter of 2017 earnings, Hasbro will start reporting its revenues by brand portfolio that include Franchise Brands, Partner Brands, Hasbro Gaming and Emerging Brands. At that time, the company will cease providing revenues breakdown by product category: Boys, Games, Girls and Preschool.
Zacks Rank & Stocks to Consider
Currently, Hasbro carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Consumer Discretionary sector include Intrawest Resorts Holdings, Inc. SNOW, MGM Resorts International MGM and Electronic Arts, Inc. EA. While Intrawest Resorts Holdings sports a Zacks Rank #1 (Strong Buy), MGM Resorts and Electronic Arts holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intrawest Resorts’ trailing four-quarter average earnings surprise is a positive 8.71%. The Zacks Consensus Estimate for Intrawest Resorts’ fiscal 2017 earnings moved up 12.9% over the last 60 days.
MGM Resorts’ posted positive earnings surprises in three of the last four quarters, with an average beat of 139.40%. Further, for 2016, EPS is expected to grow a momentous 114%.
Electronic Arts’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 32.94%. Further, for 2016, EPS is expected to grow 22.5%.
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