Shares of toys and entertainment company Hasbro (NASDAQ: HAS) advanced 5.2% to close at $87.84 on Tuesday, April 19, after the company reported Q1 results and provided improved earnings guidance for full-year 2022.
Hasbro now expects mid-single-digit growth in 2022 operating profit, up from its previous guidance of a low-single-digit growth. The company reaffirmed its low-single-digit revenue growth outlook for 2022, despite currency fluctuations and a potential revenue loss of about $100 million in Russia.
Q1 Results in Detail
Hasbro posted mixed results for the first quarter. Q122 revenue grew 4% year-over-year to $1.16 billion, beating analysts’ estimate of $1.15 billion.
Revenue from Hasbro’s Consumer Products segment (includes traditional toys and games) increased 3% to about $673 million, while revenue from the Entertainment segment, which includes film and television assets, rose 4% to $228 million.
Meanwhile, revenue from the Wizards of the Coast and Digital Gaming segment (comprises tabletop and digital games) grew 9% to $263 million. Management highlighted the success of its latest Magic: The Gathering release—Kamigawa: Neon Dynasty, which is the 5th Magic set to generate over $100 million in sales.
Earlier this month, Hasbro stated that it would retain its Wizards of the Coast division, despite pressure from activist investor Alta Fox Capital to spin off the unit.
Despite higher revenue, Hasbro’s Q122 adjusted EPS declined 43% to $0.57 and missed analysts’ forecast of $0.64. Bottom-line results were impacted by higher input and freight costs as well as supply chain disruptions.
Management Commentary
Commenting on the Q1 results, Hasbro’s CFO Deborah Thomas stated, “Our first quarter results were in line with our plans, as the team continued to manage supply chain disruptions, positioning us to meet or exceed our outlook for the year.”
Thomas added that the planned price hikes in its consumer products business in Q222 will help offset higher input and freight costs in the upcoming quarters.
Thomas also stated that given its cash position and positive forecast, the company is resuming its share repurchase program, with a plan to buy back shares worth $75 million-$150 million in 2022.
Wall Street’s Take
Following the Q1 results, KeyBanc analyst Brett Andress lowered the price target for HAS stock to $105 from $115 but reiterated a Buy rating.
The Street is cautiously optimistic on Hasbro, with a Moderate Buy consensus rating that breaks down into five buys and two Holds. The average Hasbro price target of $105.71 implies 20.34% upside potential from current levels. Shares have declined 13.7% year-to-date.
Conclusion
While Hasbro expects its price hikes to mitigate the impact of increased costs, persistent supply chain issues could continue to be a drag on profitability.
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