Hasbro, Inc. (NASDAQ:HAS) topped Wall Street’s quarterly estimates after sales of girls toys went vertical thanks to the Disney Princess and Frozen dolls it grabbed away from Mattel, Inc. (NASDAQ:MAT) a couple of years ago.
Indeed, ever since Hasbro won the rights to the toy lines, it’s been a tale of two stocks. Hasbro stock is up about 50% over the past two years vs. a 5% gain for MAT. Best of all for anyone with HAS, there appears to be plenty of upside left in these toy brands.
For the third quarter, Hasbro’s earnings came to $257.8 million, or $2.03 a share, up from $208.6 million, or $1.64 a share, in the same period last year. That topped analysts’ average forecast for earnings per share of $1.74, according to a survey by Thomson Reuters.
In other words, this was a big earnings beat.
Revenue was also better than expected. Hasbro’s top line expanded 14% to $1.68 billion from $1.47 billion. The Street was looking for revenue of $1.56 billion.
Momentum slowed, however, in the sales of toys directed at boys, which is the division that houses the Star Wars line. Revenue rose just 2% to $605.5 million. Sales of girls toys, though, shot up 57% to $462 million. As noted above, the explosive growth in girls toys was driven by Disney Princess and Frozen, but there were other areas of strength. Dreamworks’ Trolls dolls, Baby Alive and Furby toys all contributed to the top-line gains.
Hasbro (HAS) Stock Just Getting Started
Hasbro stock is now up more than 20% for the year-to-date. Between the holiday selling season and the potential for some window dressing as portfolio managers close their books on the year, HAS stock has the potential for even more outperformance ahead.
Click to Enlarge The earnings beat couldn’t have come at a better time for chart watchers. Monday’s strong gains allowed Hasbro stock to narrowly avoid a death cross to start the trading week.
Rather than carve out the dreaded sell signal, shares managed to overcome their 200-day moving average and break resistance at the 50 DMA too.
With a forward price-earnings multiple of 18 on a long-term growth forecast of 12% a year, Hasbro stock isn’t exactly a bargain. But then valuation is something that reverts to the mean over time. It’s not necessarily relevant to a stock riding strong positive sentiment — and maybe some performance chasing as well — in the shorter term.
If nothing else, the latest results should shore up the Street’s convictions on the name. Perhaps we’ll even get an upgrade or two. Of the 12 analysts covering HAS stock, only three call it a buy. The remaining nine say it’s a hold. With an average price target of $87 a share, there’s less than 7% implied upside in shares. It wouldn’t be unusual if some analysts lifted their target prices after today.
Hasbro stock appears to have kicked off a new uptrend at a fortuitous time. With the all-important fourth-quarter underway, the market could very well bet big on another earnings beat after the holidays.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.