In late 2019, Hasbro (HAS 4.01%) stock was trading near all-time highs, but just months later, the stock price plunged to levels not seen in more than four years. The one-two punch of tariffs on goods from China and fears related to the pandemic left investors wondering what was next for Hasbro and, more broadly, the toy industry overall.
When Hasbro reported second-quarter earnings on Monday, the company put to rest any lingering doubts about what the future has in store for this leading toy maker.
Image source: Getty Images.
Hasbro sees a return to form
Hasbro reported revenue of $1.32 billion, which grew 54% year over year, though it's worth noting there was a low bar to clear due to pandemic-related comps. More impressive, however, was that sales climbed 9% compared to strong growth in Q2 2019. Hasbro also boosted its bottom line. Excluding a one-time charge, Hasbro generated earnings per share (EPS) of $1.05, compared to adjusted EPS of $0.02 in the prior-year quarter.
To put the high-level results into perspective, analysts' consensus estimates were calling for revenue of $1.17 billion and adjusted EPS of $0.48, according to Yahoo! Finance.
Hasbro saw robust growth across each segment
Hasbro reported solid growth across the breadth of the company's brand portfolio, with every major division notching gains. Perhaps more importantly, Hasbro saw double-digit percentage sales increases in each of its four major geographical reporting segments, pointing to a broad recovery in worldwide consumer spending.
The biggest contributor to Hasbro's blowout performance was a return to form for the company's franchise brands. Strong contributions from brands like Magic: The Gathering, Nerf, Transformers, Play-Doh, and My Little Pony pushed franchise revenue up 72% year over year. The company's Wizards of the Coast and digital gaming segment delivered the most notable performance, rising more than 100%.
Partner brands also had a strong showing, generating revenue growth of 53%. Products based on popular movie and television characters helped fuel the increase, including Marvel, Star Wars and The Mandalorian, Disney Princess, and Beyblade.
Even on the heels of robust growth during the pandemic and related lockdowns, Hasbro gaming delivered gains of 7%, led by Dungeons & Dragons and Duel Masters. Hasbro also reported an encouraging launch of Foosketball.
Emerging brands also delivered the goods, up 54% year over year, boosted by growth from PJ Masks, Peppa Pig, GI Joe, and Furreal Friends, among others.
Finally, Hasbro's TV/film/entertainment portfolio grew 48%, aided by the delivery of new scripted, unscripted, and animated television programs and music.
Image source: Getty Images.
Setting the stage for future growth
In late 2019, Hasbro announced plans to acquire Entertainment One (eOne), the indie film and television studio behind some well-respected children's programming, including Peppa Pig and PJ Masks. Hasbro has developed a winning strategy of developing television and movie franchises from its intellectual property, which in turn sells more toys. This method works just as well in reverse -- introducing a portfolio of products based on already successful television franchises.
On the conference call to discuss the results, CEO Brian Goldner said eOne is hard at work creating new television and movie content from Hasbro intellectual property, with "more than 200 projects in development across TV, film, and animation, more than 30 Hasbro brands are being developed."
Hasbro has other catalysts that will boost growth going forward. This past weekend, Hasbro released Snake Eyes: G.I. Joe Origins in theaters. My Little Pony will be debuting a new feature-length film on Netflix later in the year, and Transformers: Rise of the Beasts is slated for a theatrical release in 2022.
Game on!
Goldner provided a rosy forecast for the rest of 2021, saying that Hasbro is on track to grow revenue, adjusted earnings, and adjusted EBITDA. He went even further, stating that each of Hasbro's segments is expected to achieve double-digit growth this year.
Since bottoming out in March of last year, Hasbro shares have already more than doubled, putting the stock within striking distance of its all-time highs. Given the host of new and existing catalysts, it looks like it's game on for Hasbro.
