), the largest manufacturer of toys in the world, reported
fourth quarter 2011 earnings of $1.07 per share, beating 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.
During the quarter, net sales were $2,153.8 million, up 1% year
over year but below the Zacks Consensus Estimate of $2,221.0
million. Net sales in the quarter included an unfavorable foreign
currency impact of 1%.
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
Worldwide gross sales were $2,352.6 million versus $2,327.4
million in the prior-year period. U.S. gross sales fell 2% year
over year, due to stiff competition through promotions while
international gross sales rose 5% year over year.
Worldwide gross sales for the Mattel Girls & Boys Brands
business unit were up 7% year over year to $1,357.0 million.
Further, worldwide gross sales of Barbie (up 6%), Hot Wheels (up
11%), Other Girls Brand (up 19%) and Entertainment business (up 3%)
witnessed significant upside. American Girl line also grew 4% to
$283.9 million, but Fisher-Price Brands sales decreased 10% to
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 and operating margin enhanced 290
bps to 23.1% on the back of lower other selling and administrative
expenses (down 110 bps).
At the end of 2011, Mattel's cash and cash equivalents were
$1,369.1 million compared with $1,281.1 million in 2010. Long-term
debt was $1,500.0 million versus $950.0 million in the year-ago
The company's debt-to-total-capital ratio for 2011 was 37.4%. As
of December 31, 2011, shareholders' equity was $2.61 billion versus
$2.63 billion, as of December 31, 2010.
During the quarter, Mattel repurchased 4.0 million shares for
approximately $112 million. The company also hiked its quarterly
dividend by 35% to 31 cents, thus bringing the annualized dividend
to $1.24 per share compared with the previous payout of 92 cents
The company reported solid results for the third consecutive
year and holiday season sales were also impressive, despite
uncertain economic environment and lower consumer spending.
The company also enhanced its shareholders' value by increasing
dividend. Hence, we expect estimates to go up in the coming days.
The Zacks Consensus Estimates for 2012 and 2013 are pegged at $2.13
and $2.33, respectively.
We have a Neutral recommendation on Mattel over the long term as
it possesses an industry leading position, strong balance sheet and
is reaping benefits from its 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. We also remain positive about Mattel's recent deal of
acquiring HIT Entertainment for $680 million to own the
intellectual property and marketing rights of pre-school toy brands
in the long run.
However, we remain cautious on the stock based on the
challenging economic conditions, volatility in consumer demand,
higher manufacturing costs, ongoing litigation with MGA over the
rights to the Bratz dolls. In addition, competition from private
label toys and video game industry and unfavorable currency
exchange rates continue to remain headwinds.
Mattel currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating.
One of Mattel's primary competitors,
) is slated to release its fourth-quarter 2012 earnings on February
6, 2012, before the opening bell.
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