Image source: Hasbro.

Toymaker Hasbro (NASDAQ:HAS) reported strong third-quarter 2016 results before the market open on Monday. Revenue, operating profit, and earnings were all up significantly. Growth drivers were Disney (NYSE:DIS) partner brands Disney Princess and Disney Frozen, plus the dependable franchise brand duo of Nerf and Play-Doh.

Investors cheered Hasbro's results, sending shares up 7.3% on Monday. The stock has returned 23.7% in 2016, compared to rival Mattel's 15.2% and the broader market's 5.9%.

Hasbro's key quarterly numbers

 MetricQ3 2016 Result Growth (YOY)               
Revenue  $1.68 billion                  14.2%
Operating profit  $362.1 million 19.3%
Net income  $257.8 million  24.2%
Earnings per share (EPS)  $2.03  23.8%
Adjusted EPS  $2.03  28.5%

Data source: Hasbro. YOY = year over year.

Currency headwinds, due to the relative strength of the U.S. dollar versus foreign currencies, have considerably subsided from last year's and even last quarter's levels. Third-quarter revenue includes a negative $2.8 million impact from foreign exchange compared with last quarter's negative $17.7 million impact.

Operating and profit margins increased, with operating income and earnings growing faster than revenue. Adjusted EPS is the earnings number to focus on, since it provides a like-to-like comparison. This comparison excludes the $0.06-per-share gain in last year's third quarter from Hasbro's sale of its manufacturing facilities in Massachusetts and Ireland.

Long-term investors shouldn't give too much credence to analysts' estimates since Wall Street is focused on the short term. However, it's worth noting that Hasbro beat revenue expectations of $1.56 billion and smashed EPS estimates of $1.74.

Girls toys and games: The dynamic (category) duo

Sales of girls toys, which jumped 57% from the year-ago period, and games, up 13%, led category results. 

Image source: Hasbro.

Overall, revenue from Hasbro's franchise brands -- its key internal brands -- increased 2%, driven by Magic: The Gathering, Nerf, Play-Doh, and Transformers. Revenue from partner brands grew 19%, driven by Disney Princess and Disney Frozen, Dreamworks' Troll, and, to a lesser extent, Yo-kai Watch (a role-playing video game).

Girls results were driven by robust performance by Disney Princess and Disney Frozen fashion and small dolls, Dreamworks' Trolls, as well as growth in Baby Alive and Furby products. The two Disney brands are new sources of revenue for Hasbro in 2016, as the global rights to produce and market these dolls transferred to it from Mattel on Jan. 1. 

Growth in games was driven by multiple gaming formats, including face-to-face, off-the-board, and digital. Growth in franchise brand Magic: The Gathering, Pie Face, and several other brands contributed to the strong results.

Boys results were driven by Nerf, as usual, and Transformers.

Preschool revenue declined 8%. While trusty franchise brand Play-Doh continued to grow, its strength wasn't enough to offset declines in core Playskool products and Playskool Heroes.

Hasbro performed solidly across its three segments, with revenue in U.S. and Canada rising 16%, international up 13%, and entertainment and licensing up 8%. Within international, revenue in emerging markets grew 16%, or 15% in constant currency. Operating profits were up 22% and 17%, respectively, in U.S./Canada and international. Entertainment and licensing's operating profit declined 13%, but this is nothing investors should be concerned about as the decline was due to investments in building the company's global consumer products team and higher expenses at Backflip Studios in support of new gaming launches. 

Looking ahead

Hasbro turned in a great quarter, with the strong momentum boding well for it to cap off a solid year with a strong performance in the critical holiday quarter.

On Sept. 30, the toymaker began rolling out toys based on the upcoming pre-holiday release of Rogue One: A Star Wars Story, so we didn't get an indication in the third quarter as to consumer demand for these toys. However, Hasbro CEO Brian Goldner continues to maintain that the company expects total 2016 Star Wars toys sales to be about on par with 2015's incredibly strong sales of these toys.

Looking ahead to the first quarter of 2017, Hasbro has several major catalysts for growth. Notably, its toy sales should get a nice boost from Disney's release of its live action movie, Beauty and the Beast, and the broadcast premier of Frozen.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.