HAS: Buy Hasbro’s Earnings Rally

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Hasbro (HAS) dominated headlines yesterday after releasing its third-quarter earnings report. With rising sales from major franchise merchandise like “Transformers” and “Star Wars,” is Hasbro a must-have stock?

Company Profile

Hasbro185In 1952, the Hassenfeld brothers made toy history by launching Mr. Potato Head to the masses. Since then, Hasbro has grown into one of the leading players in the Toys & Games industry, with brands like My Little Pony, Playskool, Nerf, G.I. Joe and Monopoly under its portfolio.

With a global workforce of 5,500 employees across 40 countries, Hasbro brings in nearly $4.1 billion in annual sales.

Earnings Rundown

In the third quarter, Hasbro’s revenues increased by 7% year-on-year to $1.47 billion. Impressive sales of “Transformers,” Marvel, and “Star Wars” merchandise boosted earnings. Third-quarter revenue would have been $10.8 million higher, if not for unfavorable foreign exchange rates.

Hasbro’s franchise brands revenues grew 36%. Meanwhile, net earnings were $180.5 million, or $1.40 per diluted share, up from $0.96 per share last year. HAS beat analysts’ earnings-per-share estimates by a penny; adjusted net earnings increased by 9% to $187.8 million, or $1.46 per diluted share.

Hasbro also repurchased 2.4 million shares of common stock for a total cost of $124.5 million. It’s no surprise that after such a solid earnings report, HAS rallied on Monday.

Current Ratings

Over the past 12 months, Hasbro stock has fluctuated between a “B-rated buy” and a “C-rated hold.” Currently, HAS is a “B-rated buy.”

As a sign of solid buying pressure, Hasbro receives a “B” for its Quantitative Grade. On the fundamentals side, Hasbro earns top marks for return on equity (A), earnings momentum (B), and analyst earnings revision (B). However, when it comes to sales growth (C), earnings growth (D), operating margin growth (C), earnings surprises (C), and cash flow (C), there’s plenty of work to do. HAS receives a “C” for its Fundamental Grade.

Still, Hasbro’s strong earnings results will likely boost its Fundamental Grade; we’ll find out once the latest results are plugged into the Portfolio Grader system over the weekend. As of this posting, Oct. 21, consider HAS a “B-rated buy.”

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


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