- Earnings Beat: Q3 EPS of $1.73 beats expectations by $0.44.
- Consumer Product Decline: Revenue down 14.7% due to weak toy sales.
- Gaming and Licensing Shine: Strong performance from Magic: The Gathering and Monopoly Go!
Hasbro, Inc. (NASDAQ: HAS)’s Q3 2024 earnings delivered mixed news for investors. While earnings per share (EPS) came in strong at $1.73, beating expectations by $0.44, revenue missed the mark, decreasing 14.7% year-over-year (yoy) to $1.28 billion. Despite revenue shortfalls, Hasbro’s strategic pivot toward digital and gaming segments continues to improve margins, and their cost-cutting measures are visibly strengthening the bottom line.
Here are some of the key takeaways from its latest earnings for investors.
1. EPS Beat, Revenue Miss
Hasbro’s EPS exceeded expectations, driven by operational efficiencies, but overall revenue declined due to weaker Consumer Products sales, especially in action figures and Star Wars-branded toys. Wizards of the Coast and digital gaming also experienced a slight drop, offsetting strong growth from Monopoly Go! and Magic: The Gathering.
2. Strength in Gaming and Licensing Segments
Hasbro’s gaming brands like Magic: The Gathering and Dungeons & Dragons (D&D) continue to outperform, with growth from new set releases and digital engagement, particularly in Magic Arena. Licensing revenue from popular titles such as Monopoly Go! also contributed to profitability.
3. Cost-Cutting and Margin Improvement
Hasbro’s disciplined cost-cutting efforts and supply chain improvements have paid off, resulting in its highest Consumer Products operating margin in three years. Adjusted operating margin reached 25.7%, reflecting a successful transition toward more profitable revenue streams and improved inventory management.
4. Continued Consumer Products Weakness
Consumer Products segment revenue declined 10%, attributed to the exit of some brands, fewer closeout sales, and action figure weaknesses. This offset gains in licensed brands, suggesting challenges in Hasbro’s core toy lines as the company seeks to stabilize this business.
Should Investors Invest?
Hasbro’s strategic shift into digital, gaming, and licensing positions the company well for long-term growth in high-margin areas. Gaming IPs like Magic and D&D continue to drive engagement, and partnerships with companies like Scopely boost licensing revenue. While Hasbro faces near-term revenue pressure from traditional toy segments, the improving margin profile and ongoing cost savings are promising signs of a resilient, evolving business.
Key Risks
- Continued Consumer Segment Softness: Despite robust demand in gaming and digital segments, Hasbro’s Consumer Products segment remains under pressure, particularly from action figures, potentially limiting revenue growth.
- Reliance on Licensing Partners: While partnerships like Scopely (for Monopoly Go!) support growth, reliance on third-party platforms may expose Hasbro to execution risks outside its control.
- Macro-Economic Pressures on Consumer Spending: Any economic downturn could further impact demand for toys and games, especially if consumer discretionary spending contracts during the holiday season.
Strong growth prospects in digital gaming but near-term challenges persist
Investors seeking exposure to a diversified entertainment company with strong growth prospects in digital gaming should consider Hasbro. However, with persistent challenges in the traditional toy business, it may be prudent to monitor the stock for potential price dips to gain exposure at a more favorable valuation.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.
