Hasbro: Potential Transforming Portfolio
Bee-bop-boo-bop-bee-bee-bop. That's the sound of Hasbro (NYSE: HAS) transforming your portfolio, just like it's transforming its image, brand, and Barron'sBarron's outlook on the stock. Hasbro is trading near its 52-week high of $38.82, currently at $38.03.
The company has positioned themselves well over the past few years, mainly by initiating several moves for their key toy: Transformers. Transformers were a hot commodity in the 1980's, but have since fallen off of the radar...until the release of their major motion picture in 2007. Sales of the toys, normally in the $100 million range, were boosted to $484 million that year, on top of the film grossing over $700 million plus worldwide.
Then transformers 2 was released in 2009, and sales once again topped $592 million. The second time around saw sales boosted from the more than 250 licenses for products beyond just action figures, including towels and sheets.
Hasbro also produces such iconic games and toys like Monopoly, Clue, Risk, Candy Land, G.I. Joe, Nerf, and PlaySkool.
CEO Brian GoldnerBrian Goldner said that their main focus is to focus on certain brands, and grow those relatively large. Proof comes as the company's top eight brands generated 50% of revenues last year, compared to 17% in 2001.
Hasbro currently has a 42% debt-to-total capital ratiocapital ratio, manageable, and $636 million in cash. Yield on their $1 dividend is a respectable 2.6%. It trades for approximately 15x FY10 EPS estimates, and 13x FY11 estimates. The company's EPS grew 24% on just a 1% increase in revs for FY09.
The big initiative for the company was to take on Hollywood. Movies such as Iron Man,Transformers, and G.I. Joe have captivated America. Next year, a third installment for Transformers will be released, and Thor and Captain America will also see some screen time.
Risks include becoming to reliant on films, and a recent investment and commitment with Discovery CommunicationsDiscovery Communications (NASDAQ: DISCA) for a children's cable network. For one, the company's puts up virtually no money to produce a movie, but doesn't pay royalties to studios under certain conditions. For the network, Hasbro may incur about $80 - $100 million per year in programming costs, but cam more than make up for that if the network is a hit.
The purpose of the network is that Hasbro couldn't get enough play-time on other networks, so they needed to start their own. Programming, on The Hub is expected later on this year. The network cast Hasbro $0.12 per share for 2009, and could cost from $0.25 to $0.30 this year.
Hasbro inked a deal with Electronic Arts (NASDAQ: ERTS) to produce games, such as Monopoly, for more electronic formats and apps.
Sales for their girl segment has also exploded in the past decade. My Little Pony and Littlest Pet Shop saw revs of $791 million, up from $60 million in 2000.
Source: Street Insider
