Hasbro (NASDAQ:HAS) reported third-quarter earnings before the market opened Monday. The leading toy and game maker posted revenue of $1.47 billion, flat with the same period last year. Adjusted earnings per share rose 7.5% to $1.58, while EPS on a GAAP basis came in at $1.64, versus $1.40 in the year-ago period. Revenue fell a hair short of the $1.48 billion analysts expected, while adjusted EPS beat the $1.53 consensus.
As expected, foreign exchange currency headwinds remain strong. Excluding currency effects, revenue increased a solid 9%.
Shares of Hasbro dropped in trading Monday. That's likely because the market was concerned about the company's long-term growth prospects. There's weakness among Hasbro's own brands, especially within the girls category. Absent the currency effect, revenue from franchise brands increased 4% in the quarter.
Hasbro's 2015 game involves a hat trick
Hasbro has now beaten earnings estimates in all three quarters this year, as it crushed first-quarter estimates and solidly bested second-quarter ones.
The company's earnings momentum bodes well for the fourth quarter, which includes the big event -- the much-anticipated release of Star Wars: The Force Awakens.
Star Wars: The Force Awakens flies into results
Hasbro's third-quarter results contained nearly a month's sales of toys based on the upcoming Star Wars film, slated to roll out to theaters starting on Dec. 18.
CEO Brian Goldner said on the conference call that toy sales were tracking at the high end of the company's expectations. Goldner also offered that the domestic/international percentage split of these toy sales was about 50-50. These toy sales should put some force in Hasbro's financial results for some time. Goldner reiterated that the company continues to forecast that the total revenue generated from the Star Wars franchise should be somewhat equally split between 2015 and 2016.
Boys and preschool categories continue to power results
Growth in the boys and preschool categories continues to fuel Hasbro's results and more than offset declines in girls and games.
Hasbro attributed the big jump in the boys category to the retail launch of The Force Awakens products, along with growth in its franchise brand Nerf, and sales of Jurassic World products. Universal's Jurassic World, released in the second quarter in North America, was one of last summer's biggest blockbusters.
The decline in the girls category was primarily led by drops in Furby, along with relatively smaller dips in My Little Pony and Furreal Friends. Growth in Play-Doh Dohvinci and Disney Descendants partially offset the fall in other brands.
International continues to lead segment results
Excluding currency effects, revenue from the U.S. and Canada segment increased 6% during the quarter, while revenue from the international segment jumped 14%. The entertainment and licensing segment's revenue slipped 2%, primarily due to tough comps: Transformers: Age of Extinction revenue boosted the year-ago period's numbers.
Hasbro's playing a long-term game
Hasbro's done a solid job this year of leveraging its brands. More importantly, it has some significant catalysts for growth in its playbook beyond The Force Awakens, notably the global rights to develop dolls based on Disney Princess characters and the immensely popular Frozen transition from rival Mattel to Hasbro in 2016.
Increasingly, Hasbro's fortunes are becoming tied to Disney. That fact is likely part of the reason for the market sell-off Monday, as investors are concerned about Hasbro's fortunes being too dependent on its licensed or partner brands. This is a legitimate concern, but I do think the market is overreacting. As long as Hasbro continues to execute well, its partners should renew these licenses when they expire. In my view, being the favored toy company of the world's most beloved entertainment company is great news for shareholders.