Join the Market Foolery crew as they check in on the most recent earnings report from leading toy company Hasbro(NASDAQ: HAS). The team also discusses the important relationship the company has forged with entertainment giantDisneyand what it could mean for both their businesses.
A full transcript follows the video.
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This podcast was recorded on Oct. 17, 2016
Chris Hill:Let's start with earnings from Hasbro, though. Third quarter. So --
Taylor Muckerman:Just applause them real quick for this.
Hill:So, important to understand that the toy makers break out their results by segment. They will come out and say, "Well, here's what we did in our girls segment, and our boys segment, preschool." That sort of thing. That's how they do it. The girls segment forHasbro ... getting it done.
Hill:Revenue up 57% year over year.
Moser:Well, if there was any question as to whether Hasbro winning thatDisneyPrincesses deal from Mattel a little while back was going to work out well, this should put it to rest. I think this is a surefire indicator that they knew what they were doing. I'm sure they're paying a pretty penny for it, but it's going to result in them making a pretty penny from it, as well. When management calls it "the greatest revenue and earnings quarter" in Hasbro's history, you got to feel like maybe they're on to something and that's what they called it.
As you mentioned, the girls division just continues to get it done. A lot of success in there with the Disney Princess stuff. Interesting, sort of playing off ofMattelthere. Mattel still trying to find success in Barbie, but I think we've seen a lot of headwinds lately with that franchise. So, certainly, whenever you can sort of leverage off of the success of another big company, in this case Disney, it gives a lot of visibility into the coming quarters and the coming years. This is all leading up to what will be another successful holiday season for Hasbro.
I think what really is impressive with this business is they really do a good job of bringing it all down to the bottom line. What I mean by that, if you look just over the past five years where you can see the the top-line revenue is up 13%. That's not bad. Net income grossed 39%. Earnings per share grossed 50%. That is just a lot of forces at play there. They're buying back some shares, but they're also just doing a really good job of manning this business and selling toys, and making this leap into sort of this age of technology.
Hill:Two things, you mentioned the upcoming holidays. One of the things that they talked about on the call was the boys segment not doing as well. Part of that had to do with a calendar shift in terms of some promotions that they were doing. But, they're also pretty optimistic heading into the holidays with the new Star Wars movie, Rogue One.
Hill:And all the toys that'll lead up to that. Second thing, when a company comes out and says, "Oh, this is the greatest quarter ever." And ... if you work on the communications staff for a public company, then sometimes it's your job just to sort of spin, "What's the best possible spin that we can put on this quarter?" In this case, you've got some rhetoric around how they're describing their quarter. One, they're backing it up, and two, look at the reaction on Wall Street. Shares up 8%. So, we've seen examples of the flip side of that where a company comes out and is like, "Here's what was great about our quarter," and investors en masse are just like --
Muckerman:"We don't agree."
Hill:"We don't agree at all."
Moser:Well, I've got a couple of very happy little shareholders at home. My daughters, Hannah and Ainsley, have owned Hasbro shares for a couple of years now and it's a stock that has performed very well for them. It's one of those types of companies you can just sort of check on it every once in awhile, but generally speaking they know what they're doing. They've got access to a lot of popular brands and names, and they're going to just continue to come up with new, creative ways to get them out there.
Muckerman:You look at this stock and the Disney stock going in opposite directions. How long before Disney considers either taking this in-house or buying a toy maker?
Moser:You know, that's an interesting perspective, and I wonder if maybe Disney hasn't really come to the conclusion that they are better off not owning it and just letting people buy that license. Right? Because they've had some trouble before, particularly in like the digital space. The games and whatnot. They do pretty well with the consumer products, but I think so much of that is just ... it's just so profitable to license that stuff out. Let people come and bid for it. You've got something people really want. Therein lies the value in that intellectual property, right? When you have a catalog like Disney has that really is, at the end of the day, that's what people want. And they want to take those names and those characters and figure out new ways to get them out there. Let those Hasbro's and Mattel's of the world figure out how to do that, and Disney can kind of just sit back and let the checks come in.
Chris Hill owns shares of Walt Disney. Jason Moser owns shares of Hasbro and Walt Disney. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Hasbro and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.