Why Hasbro Stock Popped Today

The company’s cash flow made a big jump in spite of a sales slump.

Shares of toy and game company Hasbro (HAS 12.03%) popped on Wednesday after it reported financial results for the first quarter of 2024. As of 1 p.m. ET today, Hasbro stock was up almost 11%.

Hasbro exercises operational discipline

In December, Hasbro sold much of its film and TV properties to Lions Gate for $375 million, which was used to pay down debt. This divestiture is a big reason that the company’s revenue was down 24% year over year to $757 million.

However, even without selling this part of the business, financial results were slow. The company’s key consumer products segment had a 21% drop in revenue mostly related to lower sales volume.

With a divestiture, financials can be hard to compare from one year to the next, so looking at Hasbro’s operating cash flow is helpful to keep things apples-to-apples. In the first quarter, operating cash flow was $178 million, up sharply from $89 million in the prior-year period.

Hasbro’s sales are down, but improvements to cash flow largely resulted from cutting costs. So this is likely what investors are celebrating today with the stock’s 11% gain.

What now?

Even after today’s gains, Hasbro stock is still down about 50% from its high in 2019. This poor performance reflects the fact that the business was challenged long before the first quarter. This motivated the company to lay out its Operational Excellence and Blueprint 2.0 plan in 2022.

With this plan, Hasbro vowed to cut expenses and improve its operating margin to 20%, pushing annual operating income above $1 billion in 2027. The company still has work to do, but it’s making progress. If management hits its ambitious goals, this stock clearly has upside. Therefore, it’s important for investors to keep a finger on its pulse when it comes to its operations.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.

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