Toymaker Hasbro Inc. (HAS, Financial) reported its third-quarter results on Oct. 23 before the opening bell.
The Rhode Island-based company posted earnings per share of $2.90, beating estimates of $1.94 and improving 3% from a year ago. Quarterly revenue of $1.79 billion narrowly beat expectations of $1.78 billion and increased 7% from the prior-year quarter.
The trend in Hasbro’s revenue growth over the past decade is illustrated in the graph below.
Revenue for its franchise brands segment, which includes Nerf, My Little Pony and Transformers, grew 7% to $827.3 million. Revenue for the gaming segment, which encompasses Monopoly, Magic: The Gathering and a variety of other board and digital games, increased 22% to $280.1 million. Driven by demand for its Baby Alive and FurReal Friends brands, the company posted 9% revenue growth to $198.3 million in its emerging brands segment.
Despite strong growth in its Star Wars, Disney Descendants, Sesame Street and Beyblade lines, however, revenue in the partner brands segment was offset by declines in the Yo-Kai Watch and Dreamworks’ Trolls lines.
Despite the beat and strong overall sales growth, shares fell more than 8% following the announcement due to the company’s forecasts for the holiday season. According to Chairman and CEO Brian Goldner, the bankruptcy of Toys R Us, its largest customer, will affect holiday sales and also had a small impact on the company’s revenue and operating profit in the third quarter.
Toys R Us, the largest toy retailer in the U.S., filed for bankruptcy in September.
Chief Financial Officer Deborah Thomas said the company is well positioned heading into the holidays with quality inventory, but sales forecasts have been revised due to the bankruptcy.
“We continue to work closely with Toys R Us as we head into the holiday period,” she said. “Given our new view to the holiday based on Toys R Us and the economic outlook in certain markets, our updated expectation is fourth-quarter revenues will increase in a range of 4% to 7% versus the fourth-quarter 2016.”
This revenue guidance, according to Reuters, translates to between $1.7 billion and $1.74 billion, which falls below analysts’ average projections of $1.82 billion.
Among the five gurus invested in Hasbro, Tom Gayner (Trades, Portfolio) has the largest position with 0.29% of outstanding shares. Jim Simons (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Manning & Napier Advisors Inc. and Jeremy Grantham (Trades, Portfolio) are also shareholders.
With a market cap of $11.4 billion, Hasbro was trading around $91.13 on Monday with a price-earnings (P/E) ratio of 19.72, a price-book (P/B) ratio of 6.22 and a price-sales (P/S) ratio of 2.27. According to GuruFocus estimates, the stock has gained 26% year to date.
Disclosure: I do not own any stocks mentioned.
