Hasbro ($HAS) recently announced an optimistic adjustment to its full-year profitability outlook, following a second-quarter performance that surpassed market expectations. The firm reported an adjusted earnings per share of $1.22 for the quarter ending June 30, a notable increase from $0.49 recorded in the same period last year.
This figure also exceeded the average analyst estimate of $0.76, as reported by Capital IQ. Despite a year-over-year revenue decline of 18%, the company achieved revenue of $995.3 million, which comfortably surpassed the market forecast of $943.4 million. When excluding the eOne divestiture that took place at the end of 2023, the adjusted revenue drop was just 6%.
Operating margins significantly improved to 21.3%, a stark contrast to the negative 15.6% reported in the prior year. In the wake of this announcement, shares of Hasbro experienced a 3.5% increase in Thursday's trading session. "Our performance this quarter reflects a solid showing in games and digital licensing, alongside remarkable margin improvement," remarked Chief Executive Chris Cocks in a statement addressing shareholders. Within Hasbro's largest revenue segment, consumer products, sales fell by 20% year over year, recording figures of $524.5 million.
This segment, however, faced a downturn, landing in negative territory for operating margins. Conversely, the Wizards of the Coast and Digital Gaming sector saw revenue growth of 20%, totaling $452 million, with operating margins improving significantly from 37.9% last year to 54.7%. The increase in digital licensing revenue was substantially driven by a "material step-up" in contributions from Monopoly Go!, as noted by Chief Financial Officer Gina Goetter during a conference call, referencing a Capital IQ transcript. Looking towards the remainder of the fiscal year, Hasbro has adjusted its guidance for total company adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to the range of $975 million to $1.03 billion, up from its former outlook of $925 million to $1 billion. The firm now anticipates a reduction in consumer products revenue by 7% to 11%, an enhancement from the previously forecasted decline of up to 12%.
Additionally, revenue forecasts for Wizards of the Coast now indicate a 1% to 3% decline year over year, marking an improvement from earlier estimates suggesting a 3% to 5% decline for the division. Hasbro is also projecting an operating margin of 42% in this segment, revised from its previous forecast of 38% to 40%.
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