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Hasbro's shares jump on robust Q1 results

Hasbro, one of the world largest manufacturers of toys, games, interactive software, puzzles, and infant products, issued strong financials for the first quarter of 2016. Revenues increased 16% y-o-y to $832.2 mn and surpassed consensus estimate of $770 mn. Sales in the Boys category grew 24% to $336.9 mn driven by improvement in the Nerf and Star Wars brands. Preschool revenues climbed 11% to $97.8 mn backed by growth in the Play-Doh brand. The Girls category recorded a 41% surge in revenues to $165.4 mn, marking a turnaround after five consecutive quarterly declines. Growth was mainly driven by Hasbro’s Disney Princess and Frozen fashion and small dolls. Geographically, revenues grew 28% in the US and Canada and 13% in the International segment. Operating profit increased 59% to $85.9 mn, and operating margin expanded 270 basis points to 10.3%. Adjusted earnings per share soared 81% to 38 cents comfortably beating analysts’ average projection of 24 cents.

Hasbro has a strong balance sheet and generates good cash flows, which allows it to buy back shares and pay solid dividends. During Q1, the company repurchased 475,000 shares of common stock for $35.8 mn, and had $443.5 mn remaining under the current share repurchase authorization at quarter-end. A quarterly dividend of 51 cents per share offers a healthy annualized dividend yield of 2.3%.

Given Hasbro’s strong product line-up that includes its core brands, licensed brands and lucrative product associations, the company remains well positioned for future growth, in my opinion. 

Although shares of Hasbro jumped significally on robust Q1 results, the stock, I believe, has a potential for the further growth, with medium-term target at $94.