Welcome to the Island of Misfit Toys, Hasbro (NYSE:HAS). Your old playmate Mattel's (NYSE:MAT) been waiting for you.

Hasbro proved mortal this morning, missing Wall Street expectations. The leading toymaker had topped analyst estimates in each of the six previous quarters. That streak counter is now reset at zero.

Revenue fell by 5% to $1.2 billion. Foreign exchange translations factored into the slide, but sales were still down in the United States and Canada. Earnings took a 30% smack, though aggressive share buybacks limited the carnage on a per-share basis to just 26%. Either way, a profit of $0.62 a share is well short of both the $0.84 a share it earned a year ago and the $0.75 a share that Wall Street was banking on.

Mattel posted disappointing results last week, too. The key difference here is that investors have been used to shortcomings at Mattel, dating back to the brand-battering product recalls of 2007. Hasbro shareholders may take some comfort in knowing that the rival posted sharper drops on the top and bottom line, but investors want absolute -- not relative -- performance these days.

I would still rather own Hasbro than Mattel at this point. Didn't you see the ad for the new Transformers movie during the Super Bowl? That's a huge product line for Hasbro. The company may have lucrative licensing deals with Marvel (NYSE:MVL) and Star Wars, but it actually owns the Transformers line. The cinematic revival boosted 2007 results for Hasbro, and it should factor in nicely this year.

Keep the optimism in check, of course. Hasbro is hailing 2008 as its eighth consecutive year of earnings-per-share growth, but the sluggish fourth quarter points the company in the wrong direction. It won't be easy selling toys in a soft economy. It also doesn't help that conventional toy retailers are sputtering as video game specialist GameStop (NYSE:GME) is delivering healthy gains. If the limited playthings dollar is chasing video games, there won't be much left to go around elsewhere. Hasbro, Mattel, and smaller toy companies like Leapfrog (NYSE:LF), JAKKS Pacific (NASDAQ:JAKK), and RC2 (NASDAQ:RCRC) will suffer. Clearly, they are suffering already.

It's hard to turn your back on Hasbro at this point. After earning $2 a share for all of 2008, a multiple in the pre-teens is attractive. However, the future will be challenging. If every visit to the mirror finds it looking more and more like Mattel, it may be time to find a new playmate.

Let's play a game with some more recent headlines:

RC2 is a Motley Fool Hidden Gems recommendation. Marvel Entertainment, Hasbro, and GameStop are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz wonders who will have the hot toys for the 2009 holiday season. Too soon? He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy that is harmful only if it's not swallowed.