Will Mattel (MAT) Disappoint This Earnings Season? - Analyst Blog


World's largest toy manufacturer, Mattel Inc. ( MAT ) is set to report fourth quarter and full year 2013 results before the opening bell on Jan 31, 2014. In the last quarter, it delivered a positive earnings surprise of 5.45%. Let's see how things are shaping up for this announcement.

Factors to Consider

After being considerably down in the first two quarters of 2013, sales at Mattel's core Fisher-Price products were flat year over year during the third quarter. Results in the upcoming quarter are likely to improve driven by solid product line-up, strategic association with entertainment companies and expansion into the emerging markets.

However, although Mattel launched several products in 2013, they are expected to contribute only marginally to 2013 sales. Moreover, the company is likely to be affected by age compression, which is leading to a drift toward digital solutions from traditional games, thus hurting toy sales. Limited consumer spending also continues to affect the retail environment for the toy industry.

Earnings Whispers?

Our proven model does not conclusively show that Mattel Inc. is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Positive Zacks ESP: Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.83%.

Zacks Rank #4 (Sell): Mattel Inc.'s Zacks Rank #4 when combined with a positive ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the broader consumer discretionary sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Bally Technologies, Inc. ( BYI ), with an Earnings ESP of + 4.90% and a Zacks Rank #1 (Strong Buy).

Multimedia Games Holding Company, Inc. ( MGAM ), with an Earnings ESP of + 10.35% and a Zacks Rank #2 (Buy).

Lions Gate Entertainment Corp. ( LGF ), with an Earnings ESP of + 14.55% and a Zacks Rank #3 (Hold).

BALLY TECH INC (BYI): Free Stock Analysis Report

LIONS GATE ETMT (LGF): Free Stock Analysis Report

MATTEL INC (MAT): Free Stock Analysis Report

MULTIMEDIA GAME (MGAM): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BYI , LGF , MAT , MGAM



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