JAKKS Pacific Inc.
) adjusted earnings of 6 cents per share in the second quarter of
2012, were considerably lower than the Zacks Consensus Estimate of
12 cents as well as the year-ago earnings of 18 cents. An
alteration in the payment mode of THQ settlement that took place in
the quarter pushed back $2.0 million ($0.06 per share) dues from
the second quarter to the second half of the year. This is one of
the reasons JAKKS Pacific could not match up the consensus
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On a GAAP basis, reported earnings of a penny per share were well
below the year-ago level of 16 cents. Reported income takes into
account financial and legal advisory fees. However, the company's
revenue grew 10.2% year over year to $145.4 million in the second
quarter, beating the Zacks Consensus Estimate of $137.0 million.
Gross margin in the quarter was 32.3% versus 34.2% in the
comparable quarter last year. The margin fell because of a shift in
product mix that resulted in higher royalty expense as well as
increased product cost and tooling amortization.
Selling, general and administrative expenses (including direct
selling expenses and depreciation and amortization) rose to $46.8
million, or 32.2% of net sales from $43.1 million, or 32.7% of net
sales, last year.
At quarter-end, JAKKS had cash and cash equivalents and marketable
securities of $221.8 million versus $257.5 million at December 31,
The company completed a self-tender offer on July 5, 2012 to
buyback 4.0 million shares of its common stock at $20 per share for
a total of $80 million.
For 2012, JAKKS raised its adjusted earnings per share guidance to
the range of $1.04-$1.08 from $1.01-$1.07. The company reiterated
its sales guidance in the range of $720-$728 million, implying a
growth of 6.2% to 7.4%.
The company foresees a better retail sales environment for the rest
of 2012 and remains upbeat regarding its strong product line-up.
Management also remains optimistic on the spread of the Monsuno toy
line in the U.S.
We remain optimistic on JAKKS' long-term growth potential with
product launches and a strong financial condition. Several toy
lines are doing quite well at retail levels. Increased earnings
guidance underscores management's optimism for 2012 activities.
Additionally, the company is stepping into its third quarter of
operation that is seasonally the strongest. However, cost inflation
will likely hurt the company.
JAKKS Pacific currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on the stock.
One of JAKKS' primary competitors,
) reported both second quarter earnings and revenue ahead of the
Zacks Consensus Estimates.