The past year has been a struggle for toymaker Hasbro, Inc. (Nasdaq: HAS), but HAS stock caught fire on Monday after the company reported better-than-expected second-quarter numbers. Despite the impressive quarter and the stock’s early 13 percent gain, analysts see a tough road ahead for Hasbro in the second half of the year.
Hasbro reported second-quarter adjusted earnings per share of 48 cents on revenue of $904.5 million. Both numbers topped consensus analyst estimates of 29 cents and $833.1 million, respectively. Revenue was down 7 percent from a year ago.
In recent quarters, Hasbro, Mattel ( MAT) and other toy companies have suffered from the bankruptcy and liquidation of a major customer, Toys ‘R’ Us. Analysts estimate Toys ‘R’ Us has represented an average of 9 percent of Hasbro’s total sales over the past three years. Prior to the liquidation announcement in March, analysts say Hasbro was expecting Toys ‘R’ Us to account for about 6 percent of total sales in 2018.
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Hasbro CEO Brian Goldner says the company is managing the Toys ‘R’ Us liquidation according to plan.
“We are investing in our business — in innovation, entertainment and a modern global commercial organization, to drive profitable growth in 2019 and beyond,” Goldner says in a statement.
“We are focused on moving beyond the near-term disruption of losing a major customer, with a clear path forward including new retailer activations to meet the consumer demand made available by the Toys ‘R’ Us departure.”
Franchise brands revenue, which includes My Little Pony and Nerf, declined 8 percent in the second quarter to $506.5 million. Partner brands revenue, which includes Star Wars and Marvel products, was down 10 percent to $208.0 million. Gaming revenue, a particularly weak point in the first quarter, was up 0.2 percent to $134.3 million in the second quarter. Emerging brands revenue was down 1 percent to $55.6 million.
Even after Monday’s big gain, HAS stock remains down roughly 18 percent in the past year.
Last week, BMO Capital markets analyst Gerrick Johnson said Hasbro’s Toys ‘R’ Us problems will likely continue to drag on into 2019.
“We have some lingering concerns about valuation, brand fatigue, over-reliance on movies, and an uncertainty in the toy industry,” Johnson says.
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BMO has an “underperform” rating and $75 price target for HAS stock.
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Hasbro, Inc. (HAS) Stock Soars on Earnings Beat originally appeared on usnews.com
