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Bear of the Day: Hasbro (HAS)

Hasbro, Inc. HAS recently warned on fourth quarter earnings. This Zacks Rank #5 (Strong Sell) also announced global layoffs.

Hasbro is a global branded entertainment leader through gaming, consumer products and entertainment. Some of its brands including Magic: The Gathering, Dungeons & Dragons, Hasbro Gaming, Nerf, Transformers, Play-doh and Peppa Pig.

Hasbro Warns on Q4 and Full Year

On Jan 26, 2023, Hasbro announced preliminary fourth quarter and full year 2022 financial results and it was below the Zacks Consensus.

"Despite strong growth in Wizards of the Coast and Digital Gaming, Hasbro Pulse, and our licensing business, our Consumer Products business underperformed in the fourth quarter against the backdrop of a challenging holiday consumer environment," said Chris Cocks, Hasbro chief executive officer.

Hasbro gave full year adjusted earnings of $4.43 to $4.45, which was under the Zacks Consensus. In the last week, 3 estimates have been cut for 2022, pushing the Zacks Consensus down to $4.50 from $4.61. That's still above the range.

At $4.50, that's an earnings decline of 14% from last year.

3 estimates were also cut for 2023, pushing the 2023 Zacks Consensus Estimate down to $4.92 from $5.00. But that would be an earnings rebound of 9.2%.

Layoffs and Cost Savings

Hasbro also announced leadership and organization changes, including eliminating 1,000 jobs, or approximately 15% of its global workforce. Additionally, President and Chief Operating Officer, Eric Nyman, would be departing and the Consumer Products business would report directly to the CEO.

The layoffs will start in the next several weeks.

Hasbro expects, with the layoffs as well as the ongoing systems and supply chain investments, to achieve its goal of $250 to $300 million in annual run-rate cost savings by year-end 2025 which was announced in Oct 2022.

Shares Plunged Over the Last Year

Given the falling earnings estimates and earnings warnings, it's not surprising that shares are down 33%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

It will report fourth quarter earnings on Feb 16, 2023. Presumably, there will be some kind of outlook or guidance about Q1 and/or 2023 given then.

Shares are cheap, with a forward P/E of 12.2.

It also pays a big dividend, currently yielding 4.7%. But I caution investors about chasing yield as earnings are on the decline.

Instead, investors might want to wait on the sidelines for a positive turn in the business before jumping in.

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