Why is Hasbro (HAS) down 7.1% since its last earnings report?

It’s been about a month since Hasbro’s (HAS) last earnings report. Shares have lost about 7.1% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hasbro due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Hasbro’s first-quarter results and revenues improved

Hasbro reported first-quarter 2024 results, with earnings and revenue surpassing the Zacks Consensus Estimate after missing data in the prior-year quarter.

Gina Goetter, Hasbro’s chief financial officer, said the company’s first-quarter turnaround efforts made significant progress. It achieved expected revenues and saw significant improvement in operating profit, mainly due to its operational excellence initiative and improved business structure. It remains consistent with its annual targets.

Earnings and revenues

For the first quarter of 2024, HAS reported adjusted earnings per share (EPS) of 61 cents, beating the Zacks Consensus Estimate of 27 cents. In the year-ago quarter, the company reported adjusted EPS of 1 cent.

Net revenues of $757.3 million also topped the consensus estimate of $743 million. However, revenue fell 24.3% year-over-year from $1 billion. The decline was mainly due to the disposal of shares in eOne’s film and television companies.

Brand performance

During the quarter, Franchise Brands reported revenue of $606.5 million, down 1% year-over-year.

Partner Brands revenue declined 34% year-over-year to $87.7 million from $132.7 million, primarily due to license expirations.

Revenues at Portfolio Brands were $63.1 million, down 31% from the previous year’s level of $92.1 million.

Total gaming category revenue increased 6% year-over-year to $408 million.

Segment revenues

Hasbro has three reportable operating segments: Consumer Products, Coastal Wizards and Digital Gaming, and Entertainment.

In the first quarter, net revenues from Consumer products segment declined 20.6% year-over-year to $413 million, primarily due to discontinuation and reduced sales following the closure. Adjusted operating margin was (9.2%) compared to 6.8% in the same quarter last year.

The Wizards of the Coast and digital games Total segment revenue was $316.3 million, up 8.2% from $339 million in the year-ago quarter. Adjusted operating margin was 38.8% compared to 26% in the year-ago quarter.

The Entertainment segment revenue declined 84.9% year-over-year to $28 million. Adjusted operating margin was 65% compared to (1.3%) in the prior-year quarter.

Operational highlights

In the first quarter, Hasbro’s cost of sales (as a percentage of net revenue) was 27%, compared to 28.5% in the same quarter last year. Selling, distribution and administrative expenses (as a percentage of net revenues) reached 31% in the quarter compared to 31.7% in the year-ago quarter.

The company reported adjusted EBITDA of $172.8 million, compared to $98.7 million a year ago.

Balance

As of March 31, 2024, cash and cash equivalents were $570.2 million compared to $386.2 million as of April 2, 2023. At the end of the reporting quarter, inventory was $336.2 million compared to $713 USD .4 million a year ago. As of March 31, 2024, long-term debt was $2.97 billion, compared to $3.68 billion as of April 2, 2023.

Outlook for 2024

For 2024, Hasbro forecasts segment-wise consumer product revenues to decline in the range of 7-12% on a per cc basis compared to prior-year levels. The segment’s operating margin is expected to be between 4% and 6%. In the Wizards of the Coast segment, management expects a revenue decline in the range of 3-5%. It is suggested that the operating margin will be between 38% and 40%.

HAS expects Pro-Forma Entertainment segment revenues to decline by $15 million in 2024 compared to the prior year. Adjusted operating margin is expected to be approximately 60%.

For the full year, total adjusted EBITDA is expected to be between $925 million and $1 billion.

How have estimates changed since then?

Investors have witnessed an upward trend in estimate revisions over the last month.

As a result of these changes, the consensus estimate moved by 8.48%.

VGM results

Currently, Hasbro has a strong Growth Score of A, although it lags well behind its Momentum Score of D. Plotting a somewhat similar path, the stock is given a grade of C on the value side, placing it in the middle 20% for this investment strategy.

Overall, the stock has a composite VGM score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. It’s no surprise that Hasbro has a Zacks Rank #1 (Strong Buy). We expect an above-average rate of return on shares in the coming months.

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