This week’s stock wars have two toy companies in a battle to see how they stack up in terms of financials, growth and share price return.
Entertainment: Hasbro is making a big bet on entertainment with the acquisition of Entertainment One, a television and movie-related business. The acquisition gave Hasbro access to the Peppa Pig and PJ Masks brands and brought in TV and movie studio assets.
The $4.6 billion acquisition brings to Hasbro proven television and film experts, and an enhanced focus on brand building. Entertainment One had revenue of $259.6 million in the fourth quarter.
Hasbro also signed a five-year agreement with Paramount, a unit of ViacomCBS Inc (NASDAQ:VIAC), in 2017. The deal includes upcoming movies such as “Snake Eyes: GI Joe Origins” and those in the Transformers and Dungeons & Dragons universes.
Mattel continues to build entertainment content around its library of properties like Barbie, Fisher-Price, Hot Wheels and Thomas & Friends.
Growth Ahead: One area of growth for Hasbro is digital gaming. The company mentioned Magic: The Gathering as a strong brand in its fourth quarter earnings call.
Hasbro is also working on the development of Dark Alliance, a game from Wizards of the Coast, set in the Dungeons & Dragons universe.
Mattel is in the midst of transforming the company into an “IP-driven high performing toy company” and implementing a new growth program to increase productivity and cut costs.
Mattel plans to use a capital-light business model going forward to help with its improving profitability.
Financials: Hasbro reported revenue of $5.5 billion in fiscal 2020. The company has grown its revenue in the last two fiscal years. Net income of $502 million in fiscal 2020 was lower than the $652 million reported in fiscal 2019, despite 2019 having a lower revenue total of $4.7 billion.
In the fourth quarter, Hasbro’s revenue was up 4% year-over-year to $1.7 billion with the contribution of Entertainment One helping Hasbro see growth.
Mattel had revenue of $1.6 billion in the fourth quarter, which was a 10% year-over-year increase. In the last fiscal year, Mattel had revenue of $4.6 billion, a 2% year-over-year increase.
Sales for Mattel were up 7% year-over-year in North America and down 4% in international markets for Mattel in the last fiscal year.
Mattel’s revenue has remained pretty consistent over the last three fiscal years, with a range of $4.5 billion to $4.6 billion annually.
The big difference in Mattel’s financials over the last three fiscal years has been net income. Mattel posted net income of $127 million in fiscal 2020, compared to net losses of $214 million and $533 million in fiscal 2019 and fiscal 2018, respectively.
Dividends: One thing that sets Hasbro apart is its dividend yield of 2.9%. Hasbro kept its dividend the same in 2020 as 2019 with quarterly payouts of $0.68. Prior to this, Hasbro had been raising its dividend payouts.
Mattel on the other hand stopped paying its dividend in 2017.
As Mattel returns to profitability and Hasbro posted the same dividend payout in fiscal 2020, this could be a theme to see if Mattel reinstates a dividend and if Hasbro increases its payout rate.
Stock Performance: Shares of Hasbro are up 23% over the last year and 23% over the last five years. In the last 10 years, shares of Hasbro are up 113%.
Shares of Mattel are up 76% over the last year and down 36% in the last five years. Shares of Mattel are down 16% over the last 10 years.
Investors can note that Mattel has outperformed Hasbro over the last year. A look at the long-term performance shows that Hasbro has outperformed Mattel over the last five and 10 years.
Benzinga’s Take: The acquisition of Entertainment One by Hasbro was a large one that could drive profits from the company’s intellectual property. The timing of the acquisition may be unfortunate as theatrical releases get pushed back.
Mattel has turned around with some good cost savings metrics and saw positive net income in fiscal 2020.
The dividend yield of Hasbro and the smaller return over the last year could make Hasbro the more attractive stock in this battle.
(Photo: GPA Photo Archive via Flickr)
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