Hasbro (NYSE:HAS) is officially listed as a toy and game provider, but has evolved from a previous focus on mundane board games and plush toy products. Physical toys remain a key part of its annual sales, but the company has shifted to licensing deals with multimedia partners to breathe new life into its impressive stable of toy and character brands.
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Company Overview

In recent years, Hasbro has looked to extend its toy brands and products across a wider array of media platforms. Some of its most successful brand extensions have been to include its brands, including Transformers, G.I. Joe, and Battleship, in movies and television programs. It has also looked to extend its content into video games through ventures with leading game developers such as Electronic Arts (NYSE:EA) and Activision (Nasdaq:ATVI).

New growth avenues have helped revenues rise 11.7% since 2007 and through the credit crisis downturn to $4.3 billion for all of 2011. Net earnings are up a slightly stronger 15.7% over this period and came in at $385.4 million last year, or $2.82 per diluted share. It shared $1.20 per share with shareholders in the form of dividends, which works out to an above-average current dividend yield of 4.1%.

Outlook and Valuation
Analysts currently expect Hasbro to report $2.88 in earnings per share for 2011 on a modest sales increase of 1.1% to $4.33 billion. For 2013 they collectively project a similar sales increase to $4.4 billion and profits of $3.11 per share, or annual growth of 8%. This puts the forward earnings multiples at 12.3 and 11.4 for 2012 and 2013, respectively.

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The Bottom Line
Hasbro's annual revenues are up a steady 4% over the past decade but earnings are up a much more impressive 27% annually. The operating profit margin has doubled to 14.7% and reflects the move into higher-margin licensing and content deals. Licensing deals with Disney's (NYSE:DIS) Marvel studios, including Spiderman and the Avengers that feature Hasbro characters and toys. A more recent initiative has been the development of the Hub cable channel with Discovery Communications (Nasdaq:DISCA, DISCK). Expectations for robust profit growth coupled with a reasonable earnings multiple and solid dividend payout mean great potential for double-digit annual shareholder gains going forward.

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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