All three major stock indices closed lower on Monday, thanks to a combination of a potential Greek exit from the eurozone and the Chinese economy showing signs of sluggishness.
But the news was no match for the nation’s second-largest toymaker, Hasbro (HAS), which saw its shares spike more than 7%!
Was the uptick ignited by its recent “fairy tale” deal with Walt Disney (DIS)… or something else entirely?
You see, last year, Hasbro landed a coveted licensing deal with Disney to make princess dolls, including those based on the blockbuster movie, Frozen. And Hasbro outbid its rival, Mattel (MAT), in the process.
The company began production of the dolls in the fourth quarter, and expects its production to be accretive to earnings starting in 2016. And with Frozen’s growing popularity, any potential profits from the deal will no doubt ignite shares further in the months to come.
But that’s not what caused Monday’s sudden leap…
Stock Price Always Follows Earnings
Aside from the company’s deal with Walt Disney, another major impetus behind Monday’s move higher was the company’s fourth-quarter and full-year performance.
Q4 2014 earnings of $1.22 per diluted share beat analysts’ expectations of $1.21 per share. Adjusted net earnings for the quarter were $154.9 million.
The earnings beat came atop a 1.5% increase in quarterly revenue, which rose to $1.30 billion from $1.28 billion for the quarter. That was just below analysts’ expectations of $1.33 billion.
Unlike Mattel, which posted its fifth straight fall in quarterly sales in January, Hasbro’s revenue grew in each of its operating segments. This includes the company’s emerging markets, where revenue increased by 20%.
In its report, the company took pains to explain the negative impact on revenue from the stronger dollar, which Hasbro claims reduced its revenue by $75.4 million for Q4 2014.
Excluding the foreign currency exchange, Hasbro’s revenue increased 7% for the quarter.
For the full year, the company reported full-year revenue of $4.28 billion, a 4.9% increase over last year’s $4.08 billion.
And, just as currency issues plagued the quarterly results, the same can be said of the full-year results, in which the company reported a $93.4-million impact from foreign currency exchange rates.
Hasbro indicated that the impact from the strengthening dollar was most pronounced in November and December, and further states the company expects foreign exchange to continue to be a headwind through all of 2015, as the company generates about half of its revenue from international markets.
Ex-currency, revenue for the company grew 7% year over year.
Net earnings for the full year were $415.9 million, or $3.20 per diluted share. This compares to $286.2 million, or $2.17 per diluted share, in 2013.
Ultimately, shares of the Rhode Island manufacturer closed the trading day at $59.66, an increase of $3.92 over Friday’s closing price. More than 4.9 million shares traded hands (the company’s average trading volume is nearly 1.4 million shares).
Now, with Monday’s performance, Hasbro’s one-year performance (+13.9%) is on equal footing with the one-year return for the S&P 500 (+12.4%), as well as the Nasdaq (+12.7%).
What’s more, the directors gave investors two more reasons to buy HAS shares.
You see, the Board of Directors authorized the company to repurchase an additional $500 million of its common stock, on top of the 8.5 million shares the company repurchased in 2014.
But they didn’t stop there…
The board also raised Hasbro’s quarterly dividend by 7% to $0.46 per share. The dividend will be payable on May 15, 2015 to shareholders of record at the close of business on May 1, 2015. Currently, the stock boasts a 3.1% yield.
Prudent investors will average into the shares on the dips.