Monday, February 8, 2010

Hasbro Optimistic About 2010; Shares Soar

. Monday, February 8, 2010

By stockOzone team

Hasbro Inc (HAS.N) posted a much stronger-than-expected quarterly profit and said the momentum in its games and its toys for boys would help 2010 profit and revenue rise, sending its shares up nearly 14 percent.

The upbeat forecast in an "entertainment-light" year for Hasbro -- with toys tied to the releases of only two movies "Iron Man 2" and "Toy Story 3" -- cheered investors, boosting its stock to the highest level since September 2008.

Demand for toys tied to the "Transformers" movie, meanwhile, helped boost the fourth quarter.

The No. 2 toymaker behind Mattel Inc (MAT.O) also hopes to benefit from its joint venture with Discovery Communications Inc (DISCA.O) to form a new children's television network -- The Hub -- and the creation of Hasbro Studios.

It also sees its presence in emerging markets and key long-term licenses aiding future growth.

On a conference call, Hasbro said it expects the sales momentum in the holiday quarter at its games business to continue into 2010 and added that its boys business should be "very robust" in the period.

"2010 guidance is pleasantly surprising," Timothy Conder, an analyst with Wells Fargo, said in an e-mail.

Conder said the announcement for the autumn 2010 line-up for The Hub could be an additional catalyst for shares as "investors will then be able to benchmark a base for growth of this venture going forward."

Some investors are already bullish about the joint venture and expect it to give Hasbro a big boost in 2011.

The strong results came a week after rival Mattel forecast a strong 2010 from new toy lines and renewed demand for its Barbie dolls, but failed to excite investors worried that higher costs could limit its gross margin growth.

Hasbro, on the other hand, gave investors another reason to cheer by saying it did not expect rising input costs to have a material impact on margins in 2010.

Hasbro's fourth-quarter net profit rose to $165.6 million, or $1.09 a share, from $93.6 million, or 62 cents a share, a year earlier.

Analysts on average were expecting earnings of 81 cents a share, according to Thomson Reuters I/B/E/S.

Net revenue rose 12 percent to $1.38 billion, beating analysts' average forecast of $1.34 billion. Revenue from the boys' segment rose 16 percent in the quarter.

"Overall, the fourth quarter was very good and was much better than we envisioned even factoring in what were clearly market share gains in action figures and games/puzzles," Conder said.

Standard & Poor's analyst Erik Kolb backed his "buy" rating and raised his target on the stock to $38 from $34, saying he expected the boys segment to likely remain the strongest in 2010.

Looking ahead, Hasbro has a huge entertainment lineup, with "Stretch Armstrong," "Battleship," "The First Avenger: Captain America" and "Spider-Man 4" movies all slated for release in 2012.

Last December, Hasbro also signed a 10-year deal to make and sell toys and games based on characters in the American children's television series "Sesame Street."

Disclosure: Author does not own any of the stocks discussed here.

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