Stop playing games with Hasbro Stock

Toy maker Hasbro (NASDAQ: HAS) recently had the unfortunate task of announcing the passing of Brian Goldner, 58-year-old chief executive officer, who had served as chief executive since 2008. In a fitting tribute, the company this week released third quarter results which were showing the entertainment division that Mr. Goldner was planning to move forward with as the business begins to do just that.

Under Goldner’s leadership, Hasbro moved from toys and games to entertainment with the $ 3.8 billion acquisition in late 2019 of children’s television and film producer Entertainment One (eOne). Revenue growth in this segment climbed 76% in the third quarter compared to the same period a year earlier.

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Brand new brand category

When Hasbro announced the purchase of eOne, Goldner explained his vision to add and integrate these assets into Hasbro’s existing portfolio. It wasn’t just a targeted acquisition. He said at the time: “The addition of eOne accelerates our blueprint strategy by expanding our brand portfolio with eOne’s beloved global preschool brands, adding proven television and video expertise. cinema and creating additional opportunities … ”Since then, the company has created a new segment of entertainment, while abandoning the part of that business that did not correspond to Hasbro’s strategy. Earlier this year, Hasbro sold eOne’s music business for $ 385 million.

The new entertainment segment showed explosive growth in the third quarter, with revenue up 76% from the previous year period. From a brand category perspective, TV / Film / Entertainment accounted for over 13% of total revenue, with year-over-year growth of 58% in the most recent quarter. Goldner’s vision clearly extends to what was previously just a toys and board game company.

Profitable growth path

The revenue growth has certainly been driven by the growing entertainment segment. In the first nine months of 2021, revenues totaled over $ 4.4 billion. Compare that to revenue of $ 4.72 billion for the year 2019 before the acquisition and the disruption due to the pandemic.

But sales growth also fell into the bottom line. Third quarter net profit increased 15% year-over-year. Even going back before 2020, impacted by the pandemic, net income has skyrocketed. For the first nine months ended September 26, 2021, net income was $ 350.5 million. This is 38% more than in the nine-month period two years ago. And the profits are a higher percentage of the net turnover, which shows that the company is more and more profitable.

An entertainment business that pays

It makes sense for Hasbro to integrate its own entertainment property with its existing brands. For example, the company pointed out in its third quarter report that the entertainment division transferred the popular My Little Pony brand from the company to theaters. My Little Pony: a new generationn created the Netflix in September.

Hasbro has long partnered with Walt disney, and now Goldner’s leadership has taken the company down a similar path, with the brand’s sales shifting to entertainment and back again.

For investors, this means now is the right time to own a company that pays a dividend of around 2.9% in recent stock prices, with the prospect of increasing profitability. This quarter, Hasbro executives clearly mourned Goldner’s untimely loss as a beloved leader. The results of the period were a fitting tribute to the man and his vision.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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