Hasbro, Inc. (NYSE: HAS) shares opened lower despite positive comments from CNBC’s Jim Cramer on his Mad Money Lightning Round. The hedge fund manager turned television star believes that everyone is giving up on the toy business and that has created a great bargain in Hasbro’s stock. Cramer recommended that viewers get in a little bit here and then buy more when it goes below $20 per share.
Fitch agreed with these sentiments when it upgraded Hasbro’s stock earlier this year. The ratings agency noted the firm’s leading position in the traditional toy industry with revenues of $4 billion and an improving operating performance. According to Fitch, metrics were also strong with total debt-to-EBITDA at 1.1x and EBITDA-to-interest at a healthy 14x. Meanwhile, the company’s performance in a very difficult fourth quarter was also better than expected.
Hasbro also has very strong liquidity as exemplified by its high cash balances and free cash flows averaging $392 million over the past two years and an unused $300 million revolver that will not expire until 2011. Moreover, Hasbro has no debt maturities until 2017 while management’s goal is to maintain leverage at 1.5x and double digit interest coverage. Combined, these were the reasons cited for the ratings upgrade by Fitch earlier this year.
Going forward, many analysts expect top-line weakness amid slower consumer spending. However, many estimates are already set so low that Hasbro may be able to continue beating earnings estimates given the strong movie slate including GI Joe, Transformers 2, and Wolverine that should help improve results in 2009 and 2010. Shares of Hasbro moved down $0.27, or 1.22%, to $21.80 per share in early trading.
Hasbro provides children’ and family leisure time and entertainment products and services, including the design, manufacture and marketing of games and toys. Its offerings include a variety of games, including traditional board, card, hand-held electronic, trading card, role playing and digital versatile disc (DVD) games, as well as electronic learning aids and puzzles.
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