Analyst Note| Jaime M. Katz, CFA |
We don’t plan to materially alter our $94 per share fair value estimate for narrow-moat Hasbro after digesting its 2021 first-quarter performance, which included sales growth of just 1% (to $1.1 billion) and an operating margin growth of 15% (to $174 million). Performance was lopsided given incomparable results in the entertainment segment, hindered by COVID-19-related theater closures and timing considerations (deliveries of scripted TV revenue to later in 2021). In the quarter, entertainment revenue (17% of 2020 sales) contracted 32%, while revenue for consumer products (67% of sales) and Wizards and digital (17% of sales) climbed 14% and 15%, respectively. That said, entertainment revenue is expected to match the 2019 level for full-year 2021, implying the segment could see above 45% average growth over the last three quarters of the year. Conversely, we think the consumer product and Wizards/digital segments could normalize back to single-digit rates of growth, lapping more stable second-half 2020 demand.