Toymaker Hasbro (NASDAQ: HAS) reported strong third-quarter 2016 earnings on Monday, Oct. 17, thanks largely to its lucrative partnerships with Walt Disney (NYSE: DIS). Revenue rose more than 14%, operating profit grew more than 19%, and adjusted earnings per share jumped more than 28%.
The market was delighted with Hasbro's results, sending shares soaring 7.3% on Monday. Here are four key things investors should know.
Image source: Hasbro.
1. Hasbro is gaining market share in the growing toy industry
From CEO Brian Goldner's remarks:
The [toy] industry also continued to grow, up 6% through August according to industry and company estimates, and Hasbro is gaining share. Importantly, we gained share in emerging markets such as Brazil and Russia, as well as developed economies including the U.S., U.K., Spain, Italy, and Australia.
Hasbro is growing revenue faster than the overall toy industry in major developed markets and emerging ones, which means that it's growing its market share in these markets. This is important because it's an indication that Hasbro is on the right track with its strategy and execution. It's hardly a major accomplishment for a company to simply grow in line with its industry.
Revenue grew at a double-digit pace in both the U.S./Canada and international segments. Developed economies including the U.S., Canada, U.K., France, and Italy each grew revenue in the double digits. Emerging markets increased revenue 16% with strong growth in Latin America, including Brazil, as well as in Asia, including China.
2. Star Wars revenue in 2016 should be in line with its 2015 revenue
From Goldner's remarks:
Our expectation remains that our 2016 STAR WARS revenue may match the level we achieved in 2015.
Goldner maintains that Star Wars revenue for this year will be roughly in line with its revenue last year, which was about $500 million. Hasbro began on Sept. 30 rolling out to retailers toys based on Rogue One, the stand-alone Star Wars film scheduled for domestic release on Dec. 16.
It's likely, in my opinion, that Rogue One will fall somewhat short of the box office take of last December's Star Wars: The Force Awakens, as one analyst said the media community was largely expecting. After all, The Force Awakens was not only the first new movie from the iconic franchise to be released under Disney's ownership, but also the first new Star Wars film in a decade. It's important to remember that Goldner has said that year-to-date Star Wars revenue is up "significantly" from 2015, so the company doesn't need fourth-quarter Star Wars revenue to come in nearly as strong as it did last year in order to match last year's full-year results.
3. Hasbro's investing in the digital realm -- heavily in mobile
From Goldner's remarks:
Thus far in 2016, videos Hasbro curated or created, along with user generated content, garnered nearly 5 billion views.
One of our newest games, SPEAK OUT, has generated more than 100 million online views.
Backflip Studios is scheduled to unveil an all new mobile game, DRAGONVALE WORLD, during the fourth quarter. This marks the first major release for this gaming property since Hasbro took a 70% stake in the studio.
Hasbro has been investing heavily in the digital realm -- a necessity in today's world where electronic gadgets are a mainstay in the lives of most kids, as well as adults. Management has said that its investments in its digital expertise enable it to develop immersive brand experiences, which in turn tighten its connections with consumers.
4. Disney Princess and Disney Frozen are outperforming internal expectations
From Goldner's remarks:
Hasbro's line of DISNEY PRINCESS and DISNEY'S FROZEN is off to a strong start behind a favorable reception to our core Shimmer Fashion Doll assortment. Overall the brands are ahead of our plans for the year and we recently expanded our offering with new holiday items...
The Disney Princess and Disney Frozen business -- which involves making dolls based on Disney Princess characters and Disney's immensely popular Frozen movie -- is new to Hasbro in 2016. Rival Mattel formerly held the global rights to make and market these dolls. This license win was very meaningful, as Mattel's gross sales for this line in 2015 were about $450 million, which represents about 10% of Hasbro's 2015 revenue.
Goldner went on to provide details as to what catalysts for growth of this line are on the horizon. These include the broadcast premiere of Frozen in the first quarter of 2017, a Frozen holiday special next year, and the launch of a new doll, Moana, based on the Disney movie of the same name that's slated for release in November.
A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them,