Market Analysis, Personal Finance Tips & Economic Insights
Popular

Key Points

  • The market reacts to Hasbro’s recent earnings announcement by bidding up the stock.
  • Fundamentals show management is making the right calls to turn the business around.
  • EPS Projections indicate Hasbro could be head and shoulders above its closest competitor.
  • 5 stocks we like better than Hasbro

After announcing the first quarter 2024 financial results, arguably the most critical quarter of the year as it sets the tone for any stock, shares of Hasbro Inc. NASDAQ: HAS jumped by as much as 12%. 

With Mattel Inc. NASDAQ: MAT also rallying on earnings and flirting with new 52-week high prices, momentum seems to favor the toy industry, and it could last well beyond the holiday season this time around. As the economy becomes more globalized, securing intangible assets through rights and patents is more important than ever, something Hasbro’s management has made a priority.

Wall Street remains bullish on Hasbro, as this consumer discretionary stock shows signs of turning around. 

Hasbro’s Near Top of The Range

$64.97

-0.06 (-0.09%)

(As of 04/25/2024 ET)

52-Week Range
$42.66

$73.57

Dividend Yield
4.31%

Price Target
$62.80

As of the fourth quarter of 2023, Hasbro owned 43.6% of the recreational products market share, while competitor Mattel owned 47.4%. Apart from these two, no other company poses a real threat of intrusion. Market share dominance typically shows through gross margins, and Hasbro’s stood at around 48%, matching those of Mattel’s.

The main difference between these two market leaders lies in their balance sheets. Mattel’s balance sheet shows a total debt of 56% of its assets, while Hasbro’s debt is much higher at 77%, as of the past 12 months. 

Because the Federal Reserve (the Fed) is looking to cut interest rates this year, companies with higher amounts of debt on their balance sheets may see an earnings per share (EPS) boost. Since more debt typically means more interest expenses, lower rates could significantly cut these costs and raise earnings. According to the CME’s FedWatch tool, these cuts could come as soon as September 2024, giving investors enough time to consider a second look into Hasbro. 

Management Is Making The Right Calls

According to the company’s earnings presentation, inventory levels were reduced by 53% over the year, as the business segments show that the digital space is now taking over profitability. Consumer products revenue declined by 21% over the year, showing an operating loss of $47 million. On the other hand, Wizards of the Coast and Digital Gaming segments brought 7% revenue growth and a net operating profit of $123 million. Inventory reductions mean more free cash and fewer cost burdens as management focuses on profitable segments like digital.

Management plans to cut $750 million of gross cost savings by 2025. Up to 50% of these savings would feed through the bottom line. In other words, there would be $375 million in net earnings to boost EPS. While these goals may seem a little bold, management is sending a resounding message.

Dividend Yield
4.31%

Annual Dividend
$2.80

Annualized 3-Year Dividend Growth
0.97%

Dividend Payout Ratio
-26.12%

Next Dividend Payment
May. 15

See Full Details

Offering an annual dividend yield of 4.3% couldn’t be done if management didn’t think the company’s financials could allow it. This yield would allow investors to beat stubbornly high U.S. inflation rates and almost match today’s 10-year treasury bond yield of 4.6%. 

Wall Street’s Take

As Wall Street analysts expect to see 18.4% EPS growth this year, it would seem the markets think a stronger 2024 is ahead for the company. By comparison, Mattel has a 10.2% projection.

The forward P/E ratio also shows investors how Hasbro commands a premium over Mattel’s future earnings valuation; Hasbro’s 17.2x forward P/E calls for a 36.5% premium over Mattel’s 12.6x. 

Hasbro stock’s institutional quality remains high, as institutional ownership currently stands at 91.8%. In fact, over the past 12 months, the stock saw $1.9 billion in institutional inflows (which represented nearly 20% of the company’s market capitalization). 

MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Hasbro wasn’t on the list.

While Hasbro currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Just getting into the stock market? These 10 simple stocks can help beginning investors build long-term wealth without knowing options, technicals, or other advanced strategies.

Get This Free Report

Share this article
Shareable URL
Prev Post
Next Post
Leave a Reply

Your email address will not be published. Required fields are marked *

Read next
Key Points Cava Group stock is currently trading about 4% below its February 29 high of $59.84, finding support…
Key Points Lucid had another tepid quarter with increasing cash burn, sending shares down 15%.  The company is…
As U.S. interest rates remain elevated and the dollar continues its strong run for much of 2024, emerging market…