Today it was announced that Hasbro (HAS) was up “big” on better than expected earnings due to licensing agreements with Disney based on the latest Star Wars release and Frozen. The combined impact of the two movies has had what appears to be an exaggerated impact on year-over-year earnings. In the linked article above, we include the closing paragraph:
“Following the release of its earnings results, shares of Hasbro soared in Monday’s pre-market trading session; the stock continued to gain after the opening bell, and is currently up 4.4%. Year-over-year, the toymaker’s shares are up 16%.”
Our question, is the impact of a licensing agreement the real reason Hasbro’s stock price is higher? To examine this question, we took a look at the price performance of Hasbro’s main rival, Mattel (MAT). We’ll start with the stock price and compare it to the “year-over-year” change compared to HAS.
According to Yahoo!Finance, in the last year, Hasbro has declined as much as –11% and ultimately increased +17%. Meanwhile, Mattel has declined as much as –27% while increasing as much as +24%. The net change from the respective lows is in stark as Mattel has increased +70% while Hasbro has increased +33%, all within the last year.
Because the focal point is often the translation of earnings to the change in the stock price, you would think that the dramatic impact accrued due to the relationship between Hasbro and Disney would be more meaningful than a mere one year gain of +17% or a low-to-high change of +33%. Alternatively, what is going on at Mattel to account for the comparatively large change in the stock’s price?
From what we can tell, Hasbro’s gain in reported earnings has only a short-term impact on the stock price and for the most part the “surprises” are baked in with only industry average gains/losses to be expected going forward. As for Mattel, we cannot explain the comparatively dramatic decline and rise that has occurred in the last year. However, one thing is certain, the narrative offered for Hasbro’s gains doesn’t account for the barely noticed changes occurring at Mattel.
Final Thought: Reconsider the analysts claims in the face of clear evidence to the contrary.