April 23 (Bloomberg) -- Hasbro Inc., the world's second- largest toymaker, reported first-quarter profit that beat analysts' estimates as demand for Spider-Man toys and Play-Doh clay spurred the biggest sales gain in almost eight years.

The shares surged 7.7 percent to their highest since 1999.

Net income was $32.9 million, or 19 cents a share, exceeding estimates for profit of 1 cent. Revenue jumped 34 percent to $625.3 million, Hasbro said today in a statement. The year-earlier loss was $4.9 million, or 3 cents a share.

Sales gains were split between comic-book action figures and classic Hasbro toys such as Monopoly board games and Mr. Potato Head. The results validate Chief Executive Officer Alfred Verrecchia's decision to sell superhero action figures under a five-year licensing agreement with Marvel Entertainment Inc.

``Marvel is turning out to be a good deal,'' said Colin Symons, who helps manage $290 million at Symons Capital Management in Pittsburgh, which holds 325,000 Hasbro shares. ``They've done a good job of advancing classic lines.''

Hasbro's first-quarter net income was the highest in its history, according to Sean McGowan, an analyst at Wedbush Morgan Securities.

Sales exceeded estimates of $512.3 million, the average of four projections compiled by Bloomberg. It was the biggest revenue gain since the second quarter of 1999.

Shares of Hasbro, based Pawtucket, Rhode Island, rose the most in six months, increasing $2.33 to $32.54 at 4:01 p.m. in New York Stock Exchange composite trading. It's the highest price since May 12, 1999. The shares have advanced 19 percent this year.

Regional Results

North American revenue climbed 36 percent. International sales jumped 29 percent, helped by increases in almost all product lines and changes in currency values, Hasbro said.

Mattel Inc., the world's largest toymaker, last week posted an unexpected first-quarter profit on the biggest sales gain in more than eight years.

Both toymakers are ``continually diversifying and freshening up their product lines,'' said Bob Goldsborough, who helps manage $15.6 billion at Ariel Capital Management LLC in Chicago. The firm owns Mattel shares and used to hold Hasbro.

Toys tied to the ``Spider-Man 3'' film, which debuts in U.S. theaters on May 4, added as much as $70 million to revenue, estimated Dean Gianoukos, an analyst at JPMorgan Chase & Co. Hasbro will pay Marvel at least $205 million over the next five years for rights to its characters, including comic-book heroes such as X-Men, Fantastic Four and Captain America.

Transformers

Sales of Hasbro's Transformers action figures climbed 21 percent. Hasbro will introduce new toys in June tied to a Transformers film slated for a U.S. release in July.

Sales of toys geared toward girls climbed 62 percent on the Baby Alive doll, My Little Pony and Littlest Pet Shop. Games climbed 8 percent, led by a 22 percent increase in Monopoly. Sales of Nerf sports equipment jumped 72 percent. Playskool preschool products and Play-Doh each rose more than 20 percent.

The perceived risk of owning Hasbro's bonds fell today. Credit-default swaps based on $10 million of the company's bonds fell $2,000 to $33,000, the lowest in two weeks, according to prices compiled by CMA Datavision. A decline in the contracts, used to speculate on a company's ability to repay its debt, indicates improvement in the perception of credit quality.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net.

Last Updated: April 23, 2007 16:04 EDT