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Why Is JAKKS Pacific (JAKK) Down 5.3% Since the Last Earnings Report?

It has been about a month since the last earnings report for JAKKS Pacific, Inc.JAKK . Shares have lost about 5.3% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

JAKKS Pacific Q4 Loss Narrower than Expected

JAKKS Pacific posted narrower-than-expected loss and better-than-expected sales in the fourth quarter of 2016.

Quarter Discussion

This California-based company's loss of $0.47 per share was narrower than the prior-year quarter loss of $0.50 and the Zacks Consensus Estimate of a loss of $0.71. The improvement was driven by higher top line and better margins. Lower share count owing to share buybacks also pared losses on a year-over-year basis.

JAKKS Pacific's revenues increased 2.2% year over year to $167 million and also exceeded the Zacks Consensus Estimate of $160 million by over 4%.

Behind the Headline Numbers

Gross margin in the quarter was 31.2%, up 90 basis points (bps) year over year, driven by ongoing margin enhancement initiatives, partially offset by higher tooling amortization.

Operating margin was a negative 1.4%, an improvement from prior-year quarters figure of negative 4.2% on the back of higher gross margin and lower SG&A expenses, somewhat offset by higher marketing expenses.

Adjusted EBITDA (earnings before interest, taxes and amortization) was $4 million, comparing favorably with the year-ago quarter's figure of negative $2.1 million, due to the higher margins on slightly higher sales in 2016.

2016 Results

JAKKS Pacific's full-year adjusted earnings of $0.07 surpassed the Zacks Consensus Estimate of $0.04 by 75%. However, the figure plunged considerably from the year-ago figure of $0.71, which reflects a decrease in revenues.

Full-year revenues of $706.6 million came above the Zacks Consensus Estimate of $698.2 billion by 1.2% but decreased 5.2% year over year.

2017 View

For 2017, JAKKS Pacific expects higher net income, earnings per share and adjusted EBITDA on lower net sales compared to 2016. Moreover, the company expects enhanced profitability in 2017 with continual focus on building its base of evergreen brands and categories as well as entering new categories, creating a strong portfolio of new and existing licenses and developing owned IP and content.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 5.1% due to these changes.

JAKKS Pacific, Inc. Price and Consensus

JAKKS Pacific, Inc. Price and Consensus | JAKKS Pacific, Inc. Quote

VGM Scores

At this time, JAKKS Pacific's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

The stock has a Zacks Rank #5 (Strong Sell). We are looking for a below average return from the stock in the next few months.

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


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

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