Hasbro beats in Q3, but its stock drops anyway

Hasbro (NYSE: HAS), a toy maker which competes with Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK), reported earnings for the third quarter on Monday. The top line increased 6% to $1.2 billion. The bottom line came in at $0.89 per diluted share. If you adjust the earnings reported in the previous year's quarter for a tax benefit, then the growth rate for the current quarter in terms of per-share profit becomes a very decent 14%.

According to this source, Hasbro beat analyst expectations by three pennies. That's a lot better than the usual penny. In addition, management came ahead on the revenue front as well. But did the stock rally on this news? No, it didn't. As of this writing, Hasbro's shares are trading down 7%. I'm surprised to some extent. I at least would have figured a flat performance for the stock. Hasbro is a big name when it comes to toys, and it sells merchandise based on big brands such as Star Wars and Transformers. We are now in the Christmas-shopping season; it's Hasbro's time of year. Thing is, though, Wall Street is worried. It doesn't matter that the market is up as I compose this piece (by the time I submit it, the major indexes could be easily be down 300 points for who knows what). And Hasbro's stock is going to suffer right along with the market. Not only that, but the stock will probably be pressured just because no one knows exactly how much toy buying will go on.

Still, Hasbro's stock was strong earlier in the year, it pays a dividend, and the company was in the market buying back some of its shares during the quarter. Long-term investors I'm sure are willing to snap up some Hasbro. Like I say, it has some powerful properties to sell (although I do wonder how its Star Wars: The Clone Wars product line will do this Christmas since the movie didn't perform so well). However, it might be prudent to wait for a higher yield in this market. The company did well in Q3, but the fourth quarter is not going to be easy for any business.

Disclosure: I don't own any company mentioned; positions can change at any time.