A month has gone by since the last earnings report for Hasbro (HAS). Shares have lost about 1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is Hasbro due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Hasbro’s Q2 Earnings & Revenues Surpass Estimates

Hasbro reported results for the second quarter of 2018, wherein both earnings and revenues topped the Zacks Consensus Estimate. Adjusted earnings of 48 cents per share surpassed the consensus mark of 29 cents by 65.5%. However, the bottom line declined 9.4% from the prior-year quarter’s number.

Net revenues of $904.5 million exceeded the consensus mark of $844.2 million by 7.1% but, decreased 7% from the prior-year quarter. The decline in revenues can be primarily attributed to the liquidation of Toys “R” Us in the United States and other global markets. International revenues were also affected by the managing of the retail inventory amid a budding retail scene.

Brand Portfolio Performances

The Franchise Brand portfolio posted revenues of $506.5 million, down 8% year over year. Increases in sales at MONOPOLY, MAGIC: THE GATHERING and BABY ALIVE were overshadowed by a dismal performance at other Franchise Brands — including TRANSFORMERS. Revenues also declined in the United States and Canada as well as the International segments. However, Franchise revenues increased in the Entertainment and Licensing segment.

Partner Brand revenues slumped 10% to $208 million due to a decline at all other Partner Brands except for MARVEL and BEYBLADE. Revenues also slowed down in the United States and Canada, and International segments.

The Hasbro Gaming revenues increased marginally year over year to $134.3 million. Robust performances of DUNGEONS and DRAGONS, JENGA, DUEL MASTER and DON’T STEP IN IT were overshadowed by the weakness at other properties. Hasbro Gaming revenues increased in both the International segment, and the Entertainment and Licensing segment; but, declined in the United States and Canada segment. Notably, the company’s total gaming category in the quarter under review was up 14% to $312.8 million.

Emerging Brands revenues were down 1% year over year to $55.6 million.

Segmental Performance

Regionally, net revenues from the United States and Canada segment decreased 7% to $459.3 million. The segment was negatively impacted by the Toys “R” Us liquidation and the near-term disruptions of stores in both the places, partially offset by a favorable product mix. Consequently, the operating profit margin improved 10 bps year over year.

International segment revenues were $380.4 million, down 11% year over year, primarily due to Toys “R” Us U.K. liquidation and the company’s efforts to clear unsold inventory in Europe. The segment recorded operating profit of $0.2 million in comparison with operating profit of $16.9 million in the second quarter of 2017.

However, the Entertainment and licensing segment revenues grew 26% year over year to $64.7 million, backed by improved consumer products. Also, the segment’s operating profit margin improved 680 bps from the prior-year quarter.

Operating Highlights

Hasbro’s cost of sales, as a percentage of net revenues, decreased 50 bps to 37.4%. Meanwhile, selling, distribution and administration expenses, as a percentage of net revenues, increased 160 bps from the prior-year quarter. Overall operating margin declined 60 bps year over year in the quarter under review.

Balance Sheet

Cash and cash equivalents as of Jul 1, 2018, were $1.2 billion, down from $1.4 billion as of Jul 2, 2017. At the end of the reported quarter, inventories totaled $610.2 million compared with $557.5 million in the prior-year quarter.

Long-term debt increased to nearly $1,694 million as of Jul 1, 2018, from $1,199 million as of Jul 2, 2017.

Hasbro’s board of directors declared a quarterly cash dividend of 63 cents per common share. The dividend will be payable on Aug 15, 2018, to shareholders of record at the close of business as of Aug 1, 2018.

In the second quarter, the company paid $78.7 million in cash dividends to shareholders and repurchased share worth $74.1 million. At the end of the reported quarter, $565.1 million was available under the current share repurchase authorization.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month.

VGM Scores

At this time, Hasbro has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

HAS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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