On Monday, Hasbro () reported disappointing first quarter results. Though we were not happy with the performance in the quarter, we maintain our view that the firm’s dividend growth profile remains strong. Our fair value estimate of Hasbro remains unchanged.
Hasbro’s net revenue in the first quarter fell 3%, and the company did little to adjust its cost structure effectively to mitigate the earnings decline. Earnings fell into the red, with the company posting a $0.02 per share net loss during the quarter (it had earned $0.12 per share in the same period a year ago). Excluding severance-related costs, earnings per share came in at $0.04 (consensus estimates were at $0.08 per share). One of the bright spots, however, was that its international business continues to perform well, with revenue advancing 14% in the quarter. Sales in the company’s US and Canada segment dropped 16% from the same quarter last year, despite Preschool growth (namely from Sesame Street).
Though Hasbro is off to a slow start in 2012, management still believes that it will achieve revenue and earnings growth for the year (absent foreign currency impacts). With the company launching four major motion pictures in the coming months (Battleship, Avengers, The Amazing Spider-Man, and GI Joe: Retaliation), we think profitable growth is achievable. Plus, we don’t have any qualms with the company’s quarterly cash dividend of $0.36 per share, which was recently increased 20%.