Long-Term Major Divergence In The Toy Sector, But Why?

Hasbro, Inc. HAS shareholders are enduring a rough day of trading on Monday, with shares down 10.3 percent after a disappointing second-quarter earnings report from the toy giant. While Hasbro narrowly topped consensus analyst earnings and revenue expectations on the quarter, traders took the opportunity to cash out of a stock that had been red hot on the year up to this week.

Rival Mattel, Inc. MAT is also trading lower by nearly 4 percent on sympathy, but Mattel shareholders must be wondering why there hasn’t been even more correlation between the two toy stocks in recent years.

In fact, even after Monday’s sell-off Hasbro shares have still more than doubled in the past three years. In that same stretch, Mattel stock has plummeted 41.3 percent. The reasoning for the divergence is easy to see. In that same stretch, Hasbro EPS is up 56.2 percent while Mattel’s is down 62.0 percent. Hasbro revenue is up 18.2 percent, while Mattel revenue is down 13.4 percent.

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Hasbro shareholders may have been hoping for better numbers from the company in Q2, but it still reported earnings and revenue growth of 29 percent and 10 percent, respectively.

Mattel is set to report Q2 earnings on July 27, but in the first quarter the company reported a net earnings loss of $0.32 per share and a year-over-year revenue decline of 15 percent.

Hasbro investors can’t be happy with the double-digit declines on Monday. But until rival Mattel can demonstrate some consistent earnings growth numbers, Hasbro bulls are still getting the best big-name toy stock in the market.

Joel Elconin contributed to this story.