CFRA upgraded Hasbro Inc . (NASDAQ:HAS) stock from Hold to Buy, increasing the price target to $72 from $59, with the new price target being based on 18 times the firm's 2025 earnings per share (EPS) estimate, which is slightly above Hasbro's five-year average forward price-to-earnings (P/E) multiple.
The upgrade, which came on Thursday, comes after Hasbro reported a normalized second-quarter EPS of $1.22, surpassing the consensus estimates by $0.46. The reported revenue was $995 million, which was $52 million above the estimates.
The company's performance across different segments showed varying results, with Consumer Products revenue down 20% year-over-year, Digital Gaming revenue up 20%, and Entertainment revenue dropping 90%, primarily due to the sale of eOne.
CFRA has raised its EPS estimates for Hasbro for the years 2024 and 2025. The 2024 EPS forecast increased by $0.50 to $3.75, and the 2025 estimate went up by $0.25 to $4.00. The firm anticipates continued improvement in operating margin, especially as Digital Gaming, which carries a significantly higher margin of 54.7% in Q2, becomes a larger part of Hasbro's total revenue.
The analyst noted that Hasbro's revenues are believed to be at a trough, with consumer products inventory now well positioned for the future. The company is also seen as well-protected from a potential continued slowdown by the U.S. consumer, thanks to effective cost management by its leadership. As a result, a Hasbro analyst said there is an expectation of upside potential for Hasbro shares.
Meanwhile, Hasbro reported better-than-expected second-quarter earnings, with a revenue drop of 18% to $995.3 million, less severe than the anticipated 22.02% decline. The company's adjusted earnings reached $1.22 per share, surpassing the estimated 78 cents per share.
The company also updated its full-year forecast, expecting a decrease in consumer product segment revenue by 7% to 11%.
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