Investors Game for Hasbro

The toymaker's shares climbed Monday amid better than expected results and high hopes for sales of Spider-Man 3 movie merchandise

Hasbro (HAS) said Apr. 23 that it swung to a profit during the three months ended Apr. 1, after the Pawtucket (R.I.) company managed to sell many more toys and games ranging from Play-Doh to Nerf. Meanwhile the newest chapter in Spider-Man's angst-ridden cinematic adventures is arriving soon -- an event that could give another lift to the toymaker.

So far Hasbro has been managing okay. Its net earnings amounted to $32.9 million during the first quarter, compared to a loss of $4.9 million during the same period last year. "We are very pleased with the strong start to the year, with all major product categories growing year over year," CEO Alfred J. Verrecchia said in a press release Apr. 23. "That said, it is only the first quarter and there is still a lot of business to be done."

Hasbro's revenues rose 34% year over year to $625.3 million during the first quarter, driven by growth in all the company's major product categories including brands like Play-Doh, My Little Pony, and Nerf. Meanwhile Hasbro's international revenues for the quarter gained a more than decent 29% year over year to $187.7 million.

Hasbro's Marvel product line also grew sales during the first quarter. Hasbro had hammered out a licensing agreement in January, 2006, with Marvel Entertainment, Inc. (MVL) to make action figures and games based on the comics publisher and film producer's characters including Spider-Man and the Fantastic Four. Those products started shipping in late 2006, but the bulk of the business starts in 2007 and afterward, according to S&P. Columbia Pictures' movie Spider-Man 3 opens on May 4.

Amid its recent success during the quarter, the company bought back around 2.5 million shares of stock at a cost of $74 million.

While Peter Parker has yet to grapple with the dark side of his supernatural powers on the silver screen this year, Hasbro appears to have more faith in the hero's popularity than some market players did. Analysts surveyed by Thomson Financial had been expecting Hasbro to break even during the first quarter, compared to the 19 cents per share that Hasbro ended up earning. Investors bid up the stock nearly 7% to $32.31 per share in midday trading on the New York Stock Exchange.

Standard & Poor's equity analyst Erik Kolb believes a number of factors are aiding Hasbro's bottom line, including "the marketing of core brands such as Nerf and Playskool, strong international sales, and the recent alliance with Marvel, which includes brands such as Spiderman." (S&P, like, is owned by The McGraw-Hill Companies.) "Our view is tempered by uncertainty regarding upcoming movie releases and the holiday season," he wrote in an Apr. 23 research note. Kolb raised his 2007 earnings per share estimate by 12 cents to $1.75 and a target price on the stock to $33 from $31 per share.

Stay tuned to see what Spider-Man does in the coming months. It's likely the web-slinger's dust-up with the Sandman et al. will occupy the attention of movie-goers -- and Hasbro brass.

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