JAKKS Pacific, Inc.JAKK posted disappointing third-quarter 2016 results wherein both the top and bottom lines missed the Zacks Consensus Estimate. The toy maker also lowered its full-year 2016 guidance.
The California-based company's earnings per share of 82 cents lagged the Zacks Consensus Estimate of $1.11 per share by 26.1%. This also marked a decline of 26.8% year-over-year, on the back of decreased revenues.
JAKKS Pacific's revenues decreased 10.1% year over year to $302.8 million and also missed the Zacks Consensus Estimate of $337 million by the same percentage. The decline was due to the suspension of shipments by JAKKS to a major U.S. customer, the negative impact of the Brexit vote and subsequent devaluation of the British pound. A timing lag in international sales caused by shifting to direct-to-retail distribution, and lower-than-expected sales of some movie-licensed products also added to the woes.
Behind the Headline Numbers
Gross margin in the quarter was 31.4%, up 40 basis points (bps) year over year, driven by ongoing margin enhancement initiatives, partially offset by shift in product mix and the deleveraging effect of the decline in sales.
Operating margin was 11.4%, down 180 bps from a year ago due to sales decline and the deleveraging of fixed costs.
Adjusted EBITDA decreased 18.5% to $42.8 million, from $52.5 million in the year-ago quarter, due to revenue fall.
2016 Guidance Lowered
JAKKS Pacific lowered its sales expectation to approximately $755 million, an increase of 1% for full year 2016 (previous expectation was an increase of 7% to $800 million). Earnings per share are now projected to be around 56 cents, down from previous expectation of 78 cents. Adjusted EBITDA is likely to increase roughly 4% to $53 million, down from $65 million expected previously. The company's outlook reflects lower anticipated gross margin (31.8% vs 32% expected previously).
Other Financial Update
During the third quarter, the company repurchased about 172,751 shares of its common stock for $1.5 million, at an average price of $8.69 per share. At quarter end, the total amount returned to shareholders through stock and convertible note repurchases totaled $29.3 million, under the $30.0 million program authorized in Jun 2015.
JAKKS PACIFIC Price, Consensus and EPS Surprise
Performance of Other Toymakers
JAKKS Pacific currently carries a Zacks Rank #5 (Strong Sell).
A better-ranked stock in the same space is Electronic Arts, Inc. EA , whose current year growth estimate is pegged at 16.2% compared with the industry average of 9.6%. The company currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
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