Hasbro Inc. (HAS) reported its third quarter 2010 earnings of $1.09 per share, which was well ahead of the Zacks Consensus Estimate of $1.04. In the year-earlier quarter, Hasbro earned 99 cents per share. The better-than-expected results were driven by tight cost-control initiatives, which more than offset the muted growth in sales.??????Hasbro’s net revenue of $1,313.3 million in the quarter was up 3% year over year and inched past the Zacks Consensus Estimate of $1279.0 million. Excluding the impact of $16.2 million unfavorable foreign exchange fluctuation, revenues grew 4%.
Operating profit nudged up 3% year over year to $237.8 million. Operating profit margin increased slightly to 18.1% from 18.0% recorded in the year-ago quarter.
???Hasbro continues to return wealth to investors in the form of share repurchase programs and dividend distribution.
???Performance Highlights
???Hasbro experienced worldwide net revenue growth in three of its four major product categories. On an annualized basis, the Games and Puzzles category increased 2% to $387.0 million, the Preschool category grew 9% to $184.7 million, the Boys product category spiked 4% to $472.3 million, while the Girls category decreased 1% to $269.1 million.
???Geographically, net revenue from the U.S. and Canada region rose 4% year over year to $825.5 million, while its operating profit upped 23% to $158.8 million.??????The International segment reported net revenue of $458.9 million, up 3% year over year. The segment registered operating profit of $70.8 million, reflecting a 10% year-over-year rise.??????On the flip side, the Entertainment and Licensing segment experienced a notable decline in revenues in the third quarter. Net revenue in this segment plummeted 34% year over year to $27.5 million, while its operating profit showed an even greater fall to $5.9 million from $19.8 million in year-ago quarter. The decline was mainly due to lower revenues from the movie-based Transformers and G.I. Joe toys.
???We noted a 24.2% drop in Hasbro’s royalty expenses from the prior-year period to $75.6 million. Product development expenses totaled $51.6 million, up 17.5% year over year. Advertising expenses declined 0.9% from the prior-year period to $133.7 million. Hasbro reported a 1.7% rise in selling, distribution and administration expenses to $202.3 million.
???Financials??????Total assets stood at $4.2 billion at the end of the third quarter compared with $3.9 billion at the end of year-earlier quarter. Hasbro’s long-term debt was at $1.4 billion versus $1.1 billion in the comparable quarter last year.
???Hasbro repurchased a total of 6.1 million shares of common stock during the third quarter at a total cost of $260.1 million and an average price of $42.39 per share.
???Outlook??????
Hasbro expects both revenues and earnings to increase for full-year 2010, including the expected dilution of $0.25 million to $0.30 million from the joint venture with Discovery Communication (HUB).
We believe Hasbro’s strong product line-up and strategic association with Discovery as well as its commendable expense management hold promises for investors. Although Hasbro expects decent sales growth in the forth quarter, we believe the company would find it difficult to out perform its achievement in 2009, which included the release of Transformers 2, G.I. Joe and Wolverine.
Moreover, the recently released HUB network is also not expected to be accretive before 2011. Hasbro currently retains the Zacks #3 Rank, which translates into a short-term Hold rating.
HASBRO INC (HAS): Free Stock Analysis Report
Zacks Investment Research
