Summary
- Q3 results are looking good with good news for the future.
- The Latin America region negatively impacted the Quarter with the extreme COVID measures, which are not likely to be retaken.
- Hasbro significantly increased operating profit in most segments with a favorable product mix while cutting down the costs.
- Hasbro is offering a healthy dividend toinvestors secured by its' strong cash flow.
Hasbro (HAS) is a global toy and games company offering licensed consumer products. The company is increasingly focusing on digital media and entertainment after acquiring Entertainment One. After the acquisition, Hasbro offers a more diversified portfolio to investors. The company holds original brands under its' umbrella, such as Power Rangers, Monopoly, Play-Doh, and Nerf.
Hasbro dropped nearly 10% after announcing its Q3 earnings. Despite beating the earnings estimates by 12.57% market punished the Toy giant after the earnings release. The company reported $1.88 EPS for the Quarter while revenue was down YoY by 4%.
Third Quarter Was Positive
Hasbro's business proved to be resilient to the COVID-19 era; revenues dropped only 4% YoY. Operating profit increased despite the pandemic. North America's earnings were robust, with a 9% YoY revenue increase and a surprising 36% operating profit increase. The international segment delivered weaker results, mostly due to the Latin America region. Most Latin American countries suffered enormously from the pandemic and took some extreme quarantine precautions, so sales sharply decreased. Countries realized extreme safety measures are highly dangerous for the economies' health while they are not sustainable when stopping the pandemic. As a result, most countries changed their strategies, now implementing milder precautions to keep their economies on foot.
Management announced, they will continue lowering the operating and inventory costs. On the other hand, Hasbro has some exciting projects for the future; Hasbro is planning to increase its presence in the digital gaming arena with D&D and Magic titles. Baldur's Gate III' a D&D franchise game, recently launched on Steam and already got a lot of public attention. Hasbro partnered with Tencent to take a share from the massive Chinese mobile gaming industry. We can see fruitful results as soon as 2021 in the digital gaming arena. Also, it is notable that management is planning to continue focusing on digital gaming.
