Fun times for Hasbro

NEW YORK (Fortune) -- Stock-market success stories have been few and far between this year, but here's one that would make Santa Claus himself proud: Toymaker Hasbro has beaten Wall Street's expectations in each of the past seven quarters, propelling the stock higher as most of the market was plummeting.

Shares reached an all-time high near $41 in August before slumping back below $30. Even with that pullback, the shares have gained 12% over the past 52 weeks, compared with a 41% slide for the S&P 500. Shares of No. 1 rival Mattel have fallen 19% over that time.

With the Christmas presents unwrapped and the calendar now turning to 2009, should investors keep playing with Hasbro (HAS)?

The Pawtucket, R.I., toymaker has a number of factors working in its favor.

Profits through the first nine months of the year are up 7% over past year and sales for the year are forecasted to reach a record $4.1 billion, up from $3.8 billion in 2007.

Most analysts expect the momentum to continue, even with the slumping economy. "We still think, despite the market out there, that Hasbro will grow in '09 versus '08 and that would be pretty impressive," said analyst Chris White of Morgan Wedbush Securities.

But Hasbro's stock also faces a few strong headwinds, such as a weak economy, grim holiday shopping projections, currency effects from overseas sales and the hurdle of high expectations based on recent results and upcoming product releases.

Under president and CEO Brian Goldner, 45, the 85-year-old company has expanded efforts to breathe new life into its stable of classic brand names -- G.I. Joe, Monopoly, Transformers -- by licensing them for movies, television shows and video games.

"We have one mantra at Hasbro: reinvent, reignite and reimagine our world-class portfolio of brands," Goldner told analysts at a November meeting. The goal is to turn its toys and games into "global mega-brands."

That strategy started several years ago, but the company has begun reaping real benefits.

The 2007 live-action "Transformers" movie generated more than $700 million in worldwide box office receipts -- and a sequel is due out in June 2009, which should help drive Transformer merchandise sales.

Similarly, a G.I. Joe movie is due out in August. "Expectations are high for these two movies and toy sales related to them," said Gerrick Johnson, an analyst with BMO Capital Markets.

And more movies are on the way. Last February, Hasbro announced a six-year partnership with Universal Pictures to produce at least four movies based on the toymaker's brands.

Video-game maker Electronic Arts this month introduced cellphone versions of Hasbro board games such as Monopoly, Yahtzee and Risk. Universal Studios is even developing a Transformers ride for its theme parks.

Goldner, who took over as CEO in May after serving as Hasbro's chief operating officer since 2006, has won widespread praise for taking Hasbro beyond toys in those ways.

"He's a rock star," said White. "He's really visionary. He's doing something that's dramatically different. He's making Hasbro into not just a toy company but a true consumer and entertainment conglomerate."

Goldner is also focused on increasing sales in emerging markets, such as China, Brazil, Russia and the Czech Republic, which have a greater proportion of young people than in developed markets and thus present appealing opportunities.

Mattel has a much larger business in these regions, but Goldner and COO David Hargreaves have assured analysts that they "intend to play catch-up very quickly."

Some of those economies may be struggling right now, but analysts believe the push should pay off over time. "Short term it could actually pressure their earnings more than help it. But long term it's the right thing to do," says BMO's Johnson.

Even if the stock succumbs to those near term pressures and the pessimism surrounding holiday sales, it might get a bump as we get closer to the summer release of the Transformers and G.I. Joe movies. That, at least, has been the historical pattern.