Hasbro (HAS) Up 5.9% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Hasbro, Inc. (NASDAQ:HAS) . Shares have added about 5.9% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hasbro Surpasses Earnings and Revenue Estimates in Q3

Hasbro posted robust third-quarter 2017 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Earnings and Revenues Discussion

Adjusted earnings of $2.09 per share beat the Zacks Consensus Estimate of $1.93 by 8.3% and grew 3% year over year.

Hasbro's net revenue of $1.79 billion also improved 7% over the prior-year quarter and surpassed the Zacks Consensus Estimate of $1.77 billion by 1%. Notably, revenues improved in three of its four brand portfolios.

While Franchise Brands, Hasbro Gaming and Emerging Brands recorded a gain, revenues declined at Partner Brands.

Hasbro's cost of sales ratio increased 160 basis points (bps) to 40.8%. Meanwhile, selling, distribution and administration expenses ratio rose 40 bps but royalty expense ratio declined 20 bps. Additionally, operating profit fell 0.3% year over year to $360.9 million.

Behind the Headline Numbers

The Franchise Brand portfolio posted revenues of $827.3 million, up 7% year over year, driven by revenue growth in Nerf, Transformers, My Little Pony and Monopoly.

Partner Brand revenues decreased 2% to $485.7 million owing to declines in certain brands, including Yo-Kai Watch and Dreamworks’ Trolls, which were partially offset by revenue gains in Beyblade, Star Wars, Disney Descendants and Sesame Street brands.

The Hasbro Gaming portfolio recorded a 22% year-over-year increase in revenues to $280.1 million. This uptick reflects Hasbro’s diverse gaming portfolio, including face-to-face gaming and digital gaming.

Also, Emerging Brands revenues increased 9% to $198.3 million, driven primarily by growth in Baby Alive and Furreal Friends.

Regionally, net revenue from the United States and Canada segment increased 7% to $993.8 million, supported by growth across all portfolios. However, the segment was negatively impacted by the Toys “R” Us bankruptcy in the both the places as well as a shift in product mix. Consequently, the segment’s operating profit declined 5% year over year to $217.3 million.

International revenues were $739.2 million, up 7% year over year. Revenue growth in Franchise Brands and Hasbro Gaming was offset by a decline in Emerging and Partner Brands. Notably, increased sales were registered across Latin America, Emerging markets, Europe and Asia Pacific regions. However, international operating profit was $132 million, down about 1% from a year ago.

The Entertainment and licensing segment revenues grew 4% year over year to $58.4 million, backed by higher consumer products and entertainment revenues. Also, the segment's operating profit increased 20% to $16.9 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

VGM Scores

At this time, the stock has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable soley for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.