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Stock Strategist Industry Reports

Hasbro, Mattel Show Off New Products

After seeing their latest offerings, we're maintaining our outlook for both toy makers.

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Toy Fair 2016 saw the launch of a load of new products from  Mattel (MAT) and  Hasbro (HAS), reassuring us that these companies' management teams have not lost focus on supporting brand equity, a key tenet underlying our narrow economic moat ratings. With both companies recently reporting year-end results, their outlook for financial performance in 2016 was unchanged and long-term guidance remained intact as well. At this time, we plan to maintain our $28 and $72 fair value estimates for Mattel and Hasbro, respectively.

The common theme this year across the major toy marketers is the continued focus on content to drive demand. Over the next two years, Hasbro will design toys for seven theatrical releases, including Marvel's Civil War, Spiderman, and Thor; Disney's Moana; Hasbro's own Transformers 5; and Star Wars Episode 8. Hasbro has exposure to a consistent content lineup through the end of the decade, which should help to reduce cash flow volatility relative to its prior movie cycles, when slow movie years hindered the ability of the business to increase the top line easily year in and year out.

Jaime M. Katz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.