On Tuesday, CFRA adjusted its rating on Hasbro (NASDAQ:HAS) shares, downgrading the company from Strong Buy to Buy, and reducing the price target to $53 from the previous $68. The new target is set based on a 16.3 times multiple of CFRA's 2024 earnings per share (EPS) estimate, which aligns with Hasbro's three-year average forward price-to-earnings (P/E) ratio. CFRA also revised its EPS estimate for 2024 downward by $0.75 to $3.25 and introduced an EPS estimate for 2025 at $3.75.
Hasbro reported a normalized EPS of $0.38 for the fourth quarter, which was below the $1.31 from the same period the previous year, and missed consensus estimates by $0.26. Revenue for the quarter was $1.29 billion, falling short of the expected $1.68 billion and consensus estimates by $67 million. The company's performance in the quarter varied by segment, with Digital Gaming revenue increasing by 7%, while the Consumer Products and Entertainment segments saw declines of 25% and 49%, respectively. The Entertainment segment's significant drop was influenced by industry strikes and Hasbro's strategic exit from non-core businesses towards the end of 2022.
The company also faced substantial impairment charges totaling $1.3 billion related to the eOne Film and TV business for the year, along with $130 million in inventory reduction costs. For 2024, Hasbro anticipates a continued downturn in its business segments, forecasting a decrease of 7% to 12% in Consumer Products and a 3% to 5% decline in Digital Gaming.
Despite the downgrades and reduced performance expectations, CFRA maintains a positive outlook on Hasbro.
"We believe guidance is conservative and that HAS is the top player in the space," said the analysts.
InvestingPro Insights
As Hasbro navigates a challenging market environment, the InvestingPro platform offers a deeper dive into the company's financial health and future prospects. With a market capitalization of $7.12 billion, Hasbro's financial standing is significant in the toys and entertainment industry. According to InvestingPro data, the company's Price/Earnings (P/E) ratio stands at -12.82, indicating that investors are expecting a turnaround in earnings. However, looking at the adjusted P/E ratio for the last twelve months as of Q3 2023, we see a more favorable figure of 19.25.
InvestingPro Tips highlight that Hasbro has maintained dividend payments for an impressive 44 consecutive years, which is a testament to its commitment to returning value to shareholders. This is further supported by a robust dividend yield of 5.46%, as of the latest data. Additionally, the company has demonstrated a strong return over the last three months, with a 21.29% price total return, showcasing a potential rebound in investor confidence.
While analysts anticipate a sales decline in the current year, the company's liquid assets exceed its short-term obligations, suggesting a sound liquidity position. Moreover, despite not being profitable over the last twelve months, analysts predict Hasbro will return to profitability this year. For investors seeking more comprehensive analysis, InvestingPro provides additional insights; there are 6 more InvestingPro Tips available at: https://www.investing.com/pro/HAS. To explore these insights, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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