Tag: noah kiedrowski

Baby Yoda and Phase One Trade Deal Propels Hasbro

Posted on by Noah Kiedrowski

Baby Yoda and the phase one trade deal comes to Hasbro’s (HAS) recuse after a disastrous Q3 earnings call that resulted in the stock sinking 17%. Per Brian Goldner, “the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail.” I feel that management was remiss when they forecasted their ability to circumvent the tariffs and then used the tariffs as a scapegoat to justify the company missing its numbers on both top-line revenue and bottom-line profit. Now the backdrop has changed in Hasbro’s favor with the phase one trade deal with China being reached and of course, the new internet sensation Baby Yoda.

The company is in a solid position moving into the holiday season, historically their biggest quarter, with blockbusters and the holidays coming into the fold. Hasbro has its Disney toy licensing deal (Marvel, Star Wars and Disney Princess lines) that should have a strong showing with Frozen 2 and the new Star Wars film with Baby Yoda debuting in Q4. Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering), its legacy games (Monopoly and Nerf) and acquisition of Entertainment One earlier this year places the company in a position of strength. Hasbro has a compelling future across its portfolio with many catalysts in the near and long-term time horizons.

Baby Yoda
Figure 1 – Baby Yoda making his appearance last month in The Mandalorian on Disney+

Phase One Trade Deal

The U.S. and China came to terms on a phase one trade deal, benefiting any company that sources and manufactures its products in China. Hasbro has already migrated some of its supply chain away from China as a risk mitigation strategy due to the trade tensions between the two nations. The phase one trade deal provides Hasbro with supply chain flexibility and additional time to make any necessary adjustments to its business model. The previous quarter Hasbro lost momentum and attempted to attribute this to the tariffs. Now, this tariff headwind has been removed for the time being, allowing Hasbro stock to appreciate on the news. Continue reading "Baby Yoda and Phase One Trade Deal Propels Hasbro" →

CVS Health and Walgreens Finally Breaking Out

Posted on by Noah Kiedrowski

CVS Health (CVS) and Walgreens Boots Alliance (WBA) have broken out recently due to a pair of better than expected quarters and speculation of being taken private, respectively. These stocks have been beaten down for years with CVS and Walgreens plummeting by 54% ($113 to $52) and 49% ($97 to $49), respectively, from their multi-year highs. Over $110 billion in combined market capitalization had been erased from these two companies. As of late, CVS has broken out to the mid $70s, and Walgreens has demonstrated strength into the low $60s, well of their respective lows.

The single-payer narrative being pushed by presidential frontrunners and the Amazon threat via its acquisitions of PillPack/Whole Foods potentially displacing traditional pharmacies weighed heavily on these companies. Additionally, drug pricing pressures are eroding margins and limiting margin expansion over time along with the secular decline in the physical storefront retail space is hindering foot traffic and same-store sales growth. The culmination of all the aforementioned factors resulted in CVS Health and Walgreens Boots Alliance being pressured in many different directions. With threats coming from all angles, these two pharmaceutical supply chain heavyweights are not only surviving but competing and reviving their dominance in the marketplace.

CVS’ Recent Rise

CVS is fresh off back-to-back quarters that have beat analysts’ expectations while generating large amounts of free cash flow, paying down debt and returning value to shareholders. To further boost long-term growth prospects, restore growth, and fend off potential competition, CVS acquired Aetna. This creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the second-largest diversified healthcare company. This is a bold and hefty price tag to pay yet necessary to compete in the increasingly competitive healthcare space, changing marketplace conditions and political backdrop with drug pricing pressures. CVS is making a defensive yet necessary acquisition before it can go back on the offensive moving into the future. The acquisition will provide CVS with more scale to negotiate for better prices for the prescription drugs it sells through its PBM business. Continue reading "CVS Health and Walgreens Finally Breaking Out" →

Disney's Streaming Growth Driver - ESPN/Disney+/Hulu

Posted on by Noah Kiedrowski

Disney (DIS) just delivered a stellar quarter beating on both the top and bottom lines while continuing to roll out its growth initiatives.

Disney’s growth rotation is still in its early stages with the remediation of its ESPN property and flurry of growth initiatives to meet modern-day media consumption trends via streaming with its Disney+ property. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue, notably Frozen 2 and Star Wars: The Rise of Skywalker. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and will inevitably acquire full ownership of Hulu, and the company is launching its Disney branded streaming service that will compete directly with Netflix (NFLX).

Disney+ launches on November 12th, and Disney is unleashing all of its content (Marvel, Star Wars, Disney, and Pixar), which will be a formidable competitor in the ever-expanding streaming wars. As a result of its strong Q4 numbers, Disney has hit near all-time highs of ~$140 per share. I’ve been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100, and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years.

Disney’s Stellar Q4 Earnings

Disney’s Q4 earnings easily beat analysts’ expectations with substantial gains in its television networks and film studio by way of its Fox acquisition. Disney beat on both the top-line revenue and bottom-line profit. EPS came in at $1.07, beating by $0.10 per share, and revenue came in at $19.1 billion, beating by $80 million. Revenue grew by 34% year-over-year, and for the fiscal year, revenue was up 17% at $69.57 billion.

Disney’s business across the board came in strong, posting growth in every category. Revenue by segment: Media Networks, $6.51 billion (up 22%); Parks, Experiences and Products, $6.7 billion (up 8%); Studio Entertainment, $3.3 billion (up 52%); Direct-to-Consumer and International, $3.4 billion (up 361%). Operating income by segment: Media Networks, $2.14B (up 7%); Parks, Experiences and Products, $1.7B (up 4%); Studio Entertainment, $792M (up 13%); Direct-to-Consumer and International, -$553M. Continue reading "Disney's Streaming Growth Driver - ESPN/Disney+/Hulu" →

Hasbro Sinks 17% - Tariffs Negatively Impact Q3 Results

Posted on by Noah Kiedrowski

So much for Hasbro (HAS) allegedly having a diverse, flexible format supply chain and migrating its legacy supply chain out of China. Per Brian Goldner, “the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail.” Needless to say, the stock sank 17% after reporting its Q3 results. I feel that management was remiss when they forecasted their ability to circumvent the tariffs and then used the tariffs as a scapegoat to justify the company missing its numbers on both top-line revenue and bottom-line profit.

With that being said, the company is in a solid-state moving into the holiday season, historically their biggest quarter, with blockbusters and the holidays coming into fold. Hasbro has its Disney toy licensing deal (Marvel, Star Wars, and Disney Princess lines) that should have a strong showing with Frozen 2 and the new Star Wars film debuting in Q4. Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering), it's legacy games (Monopoly and Nerf) and acquisition of Entertainment One earlier this year places the company in a position of strength. Hasbro is fully committed to returning value to shareholders via a combination of share buybacks and dividend payouts. Hasbro has a compelling future across its portfolio with many catalysts in the near and long-term time horizons. The Toys 'R' Us fallout is now in the rearview while the company continues to layer-in growth initiatives.

Q3 2019 Earnings – Disappointing

Hasbro missed on both EPS and revenue coming in at $1.84 (missing by $0.36) and $1.58 billion (missing by $130 million), respectively. The previous two-quarters Hasbro beat estimates handily, and the stock broke through the $120 per share threshold as a result. This quarter, the company lost momentum and is attempting to attribute this to the tariffs.

“Hasbro remains on track to deliver profitable revenue growth in 2019, behind innovation in gaming, toys, and around Hasbro's Brand Blueprint. However, as we've communicated, the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail," said Brian Goldner, Hasbro’s chairman and chief executive officer. "The team drove continued growth in the Wizards of the Coast gaming brands, MAGIC: THE GATHERING and DUNGEONS & DRAGONS, and delivered significant new holiday initiatives. To start the fourth quarter, we are seeing a strong consumer response to the global launch of Hasbro's line for Disney's Frozen 2 and Star Wars: The Rise of Skywalker as well as the U.S. launch of the new NERF Ultra." Continue reading "Hasbro Sinks 17% - Tariffs Negatively Impact Q3 Results" →