), the largest manufacturer of toys in the world, is slated to
release its first-quarter 2012 results on Monday, April 16, before
the opening bell. The Zacks Consensus Estimate projects earnings of
7 cents per share for first quarter 2012 on revenues of $986.0
With respect to earnings surprises over the trailing four
quarters, Mattel has outperformed the Zacks Consensus Estimate in
two quarters and posted in-line results in the other two quarters.
The earnings surprise ranges from flat to 43.8%, with the average
at 24.9%. This indicates that the company has surpassed the Zacks
Consensus Estimate by the same magnitude over the last four
Previous Quarter Recap
Mattel reported fourth-quarter 2011 earnings of $1.07 per share,
which surpassed the Zacks Consensus Estimate of $1.01 as well as
the year-ago quarter earnings of 89 cents per share. The
better-than-expected results were driven by strong sales of its
core brands including Barbie, Hot Wheels and Other Girl Brands. Net
sales stood at $2,153.8 million, up 1% year over year but below the
Zacks Consensus Estimate of $2,221.0 million.
Gross profit rose 6% from the prior-year quarter to $1,160.4
million and gross margin enhanced 230 basis points (bps) year over
year to 53.9%, due to lower cost of sales. Operating income
expanded 16% to $497.5 million while operating margin enhanced 290
bps to 23.1%, on the back of lower other selling and administrative
expenses (down 110 bps). During the quarter, Mattel hiked its
quarterly dividend by 35% to 31 cents per share.
For full-year 2011, the company reported a net income of $768.5
million or $2.18 per share compared with $684.9 million or $1.86
per share in the prior-year period. For 2011, net sales rose 7% to
The analysts covered by Zacks expect Mattel to post earnings of
7 cents per share for the first quarter of fiscal 2012, higher than
the prior-year earnings of 5 cents. Currently, the Zacks Consensus
Estimate ranges between 4 cents and 9 cents a share.
Estimates Revisions Trend
Estimates have not budged in the last 60 days for the first
quarter of 2012, implying that the analysts are maintaining their
outlook post fourth quarter earnings.
Agreement of Estimate Revisions
In the last 30, out of the 11 analysts covering the stock for
the first quarter of 2012, there has been no movement in the
analysts' estimates, implying the absence of any meaningful
catalyst to drive the estimates.
For fiscal 2012 and 2013, 1 analyst revised the estimate in
positive direction, while none of the analysts revised the same in
the opposite direction, in the last 30 days.
The positive estimate revision for 2012 and 2013 was based on
the benefit from the acquisition of HIT Entertainment, margin
expansion through new round of cost saving initiative Operational
Excellence 2.0, mid single-digit price increase in January 2012 to
overcome cost inflation and turnaround in Fisher-Price brand
initiated in mid 2011. The earnings are also expected to benefit
from more share buybacks.
Over the last 7 days, no movement in estimates was noticed
either for the first quarter or for fiscal 2012 and 2013.
Magnitude of Estimate Revisions
Over the last 30 days, there has been no change in the earnings
estimate of 7 cents, $2.42 and $2.69 for the first quarter, fiscal
2012 and fiscal 2013, respectively, which implies that the analysts
expect the company to report in line.
Maintain Neutral Rating
We expect Mattel to report first-quarter 2012 results in line
with the Zacks Consensus Estimate.
We have a Neutral recommendation on Mattel as it has an industry
leading position, a strong balance sheet and the benefits from cost
containment initiatives. Its focus on top-line growth, margin
expansion, building new franchises, optimizing entertainment
partnerships, expanding international footprint and effective cash
deployment also augur well. The company also remains committed to
maintaining its long-term gross margin target of 50% and operating
margin range of 15%-20%.
However, we remain cautious on the stock based on the ongoing
litigation with MGA entertainment regarding the Bratz dolls rights.
Moreover, spike in commodity expense, transportation cost as well
as rise in wages in manufacturing hubs like China are concerning.
In addition, competition from private label toys and the video game
industry and unfavorable fluctuations in currency exchange rate
continue to remain headwinds.
One of Mattel's primary competitors,
JAKKS Pacific, Inc.
) will release its first- quarter 2012 results on April 18,
JAKKS PACIFIC (
): Free Stock Analysis Report
MATTEL INC (
): Free Stock Analysis Report
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