) is slated to release its second-quarter 2012 results on Tuesday,
April 17, before the opening bell. The Zacks Consensus Estimate
projects earnings of 21 cents per share for second quarter 2012 on
revenues of $1,139.0 million.
Over the trailing four quarters, Mattel's earnings surprise ranges
from negative 14.3% to positive 43.8%, with the average being
positive 11.8%. This implies that the company has beaten the Zacks
Consensus Estimate by the same magnitude over the last four
Previous Quarter Recap
Mattel reported first quarter 2012 adjusted earnings of 6 cents per
share, missing the Zacks Consensus Estimate by a penny. The
earnings miss was due to acquisition related costs and weak
performance of its core brands including Barbie and Hot Wheels. Net
sales stood at $928.4 million, down 2% year over year from $951.9
million and also lagged the Zacks Consensus Estimate of $986.0
Worldwide gross sales for Mattel Girls & Boys Brands business
unit declined 4% year over year to $622.2 million, as worldwide
gross sales for Barbie slid 6% and Entertainment business fell 17%,
partially offset by a 22% upside in Other Girls Brand, driven by
Monster High. Worldwide gross sales for the company's core brand
Hot Wheels also dropped 5%. Fisher-Price Brands sales remained flat
year over year at $310.2 million while the American Girl line grew
4% to $76.0 million.
Gross profit also remained flat year over year at $473.4 million,
but gross margin expanded 130 basis points (bps) year over year to
51.0%, due to a 130-bp plunge in cost of sales. Operating income
also fell 22% to $28.7 million, but operating margin expanded 80
bps to 3.1% due to lower administrative and promotional expenses
(down 20 bps), partially offset by a 230-bp rise in other selling
and administrative expenses.
The analysts covered by Zacks expect Mattel to post earnings of 21
cents per share for the second quarter of fiscal 2012, lower than
the prior-year earnings of 23 cents. Currently, the Zacks Consensus
Estimate ranges between 18 cents and 25 cents a share.
Estimates Revisions Trend
Estimates for the second quarter of 2012 have not budged over the
last 30 days, implying that the analysts do not view any meaningful
surprises for the time being. The current Zacks Consensus Estimates
for 2012 and 2013 stand at $2.39 (reflecting a year-over-year
growth of 9.84%) and $2.68 (reflecting a year-over-year growth of
Agreement of Estimate Revisions
In the last 30 days, none of the 12 analysts covering the stock for
the second quarter of 2012 revised their estimates, implying the
absence of any significant catalyst for growth.
For fiscal 2012 and 2013, 1 analyst revised the estimate in
positive direction, while none of the analysts moved in the
opposite direction in the last 30 days.
Over the last 7 days, no movement in estimates was noticed either
for the second quarter or for fiscal 2012 and 2013.
Magnitude of Estimate Revisions
Over the last 30 days, the earnings estimates remained unchanged at
21 cents, $2.39 and $2.68 for the second quarter, fiscal 2012 and
fiscal 2013, respectively, which implies that the analysts expect
the company to report in line.
However, over the past 60 days, the estimates for the second
quarter, fiscal 2012 and fiscal 2013 have move down from 22 cents,
$2.41 and $2.69, respectively.
Maintain Neutral Rating
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%, operating
margin range of 15%-20% and a payout ratio of 50% to 60% in 2012.
However, tough comparison from Cars 2 in the near term, cautious
retail ordering, higher input costs, the ongoing litigation with
MGA and increased competition make us cautious on the stock.
One of Mattel's primary competitors,
JAKKS Pacific, Inc.
) will release its first- quarter 2012 results on July 17,
JAKKS PACIFIC (JAKK): Free Stock Analysis
MATTEL INC (MAT): Free Stock Analysis Report
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