Why Hasbro Stock Popped This Week
Shares of Hasbro (NASDAQ: HAS), the toy and game maker known for products like Transformers, Magic: The Gathering, and Monopoly, were on the move this week as the stock beat quarterly estimates in spite of a decline in revenue.
According to data from S&P Global Market Intelligence, the stock was up 17.6% for the week as of Thursday's close.
Is this the start of a turnaround?
Revenue in the quarter fell 24%, primarily due to the sale of the Entertainment One video entertainment business. Excluding its effect, revenue was down 9% due to a 21% decline in its consumer products business. The challenges in the toy business reflect broader industry challenges and Hasbro's own decision to exit certain business lines and reduce closeout sales.
The company finished the quarter with revenue of $757.3 million, though that still beat estimates at $738.6 million.
While the decline in revenue might have been disappointing, investors focused their attention on the company's cost cuts, which led to improvements in the bottom line.
Adjusted operating profit doubled to $148.6 million. Its adjusted operating margin improved from 4.9% to 19.6% as it slashed inventory by 53%, improved supply chain productivity, and reduced operating costs.
On the bottom line, adjusted earnings per share jumped from $0.01 to $0.61, which topped the analyst consensus at $0.27.
CEO Chris Cocks noted the strong performance of the company's licensing portfolio as it attempts to unlock the value of its intellectual property, a tried-and-true strategy in the children's entertainment industry.
Can Hasbro keep climbing?
Looking ahead, the company continues to expect revenue to decline. It forecasts a 7% to 12% decline in consumer products, a 3% to 5% decline in the Wizards of the Coast segment, and revenue in the Pro-forma entertainment segment down $15 million.
On the bottom line, it forecast earnings before interest, taxes, depreciation, and amortization (EBITDA) of $925 million to $1 billion, meaning the stock trades at less than 10 times EBITDA. Its 4.3% dividend yield is enticing as well.
While the revenue declines are disappointing, Hasbro seems to be on a path toward further gains.
Should you invest $1,000 in Hasbro right now?
Before you buy stock in Hasbro, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Hasbro wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $488,186!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 22, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.
Why Hasbro Stock Popped This Week was originally published by The Motley Fool
