We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Cyclical companies look to one specific month or at times one quarter to make the majority of their sales for the entire year. While this can be nerve wracking for management, these time periods tend to see huge volumes, and can be extremely profitable for the company. But when merchants slow their buying trends, the company’s input costs increase, and customers reduce their buying activity, margins and revenues get crushed. This is what happened to Mattel Inc. (MAT - Free Report) , our Zacks Bear of the Day.
This Zacks Ranked #5 (Strong Sell) company designs, manufactures, and markets a broad variety of family products on a worldwide basis through both sales to retailers and direct to consumers. Mattel's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines, to design and develop innovative new products and product lines, and successfully market those products and product lines.
Recent Earnings Results
On January 25th the company posted Q4 16 earnings results where missed both the Zacks consensus earnings and revenue expectations. The company saw year over year declines in several key areas; worldwide net sales -4%, worldwide gross sales -3%, reported operating income -4%, reported EPS -14.8%, net cash flows from operating activities -19.7%, and gross margins fell by 240 basis points. On a regional view, the company saw year over year declines; net sales North America -2%, net sales International -8%, and gross sales North America -1%, gross sales International -6%.
Management’s Take
According to Christopher Sinclair, Chairman and CEO, “Our results were negatively impacted by a number of industry-wide challenges, including a significant U.S. toy category slowdown in the holiday period, and increased forex headwinds. And while our sales at retail remained strong, the slowdown triggered elevated retail promotional activity and decreased shipping, all of which had a significant impact on our gross margin."
Price and Earnings Consensus Graph
As you can see in the price and earnings estimate graph below, 2017 estimates and current stock price have sharply declined.
Due to the poor earnings report, earnings estimates for Q1 17, Q2 17, FY 17 and FY 18 have all seen declines over the past 7 days; Q1 17 fell from -$0.07 to -$0.13, Q2 17 slipped from $0.04 to $0.02, FY 17 dropped from $1.71 to $1.43, and FY 18 moved lower from $1.90 to $1.68.
Bottom Line
Mattel, has missed expectations in three out of the last four holiday quarters. While management has had recent success in stabilizing their core brands, this holiday miss makes the 2017 story a bit murky. Further, due to the deceleration in retail sell-through in December, retailers limited their orders which caused inventories to increase for Mattel. This extra inventory will weigh on 2017 sales.
If you are inclined to invest in the Toys/Games/Hobbies segment, you would be best served to wait for a better entry point as every member of the segment has a Zacks Rank #3 (Hold) or lower.
Long-Term Buys You Won't See in the News
To end on a positive note, you're invited to see the best long-term trades Zacks Research is uncovering today. These moves have double and triple-digit profit potential and are rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Bear of the Day: Mattell Inc. (MAT)
Cyclical companies look to one specific month or at times one quarter to make the majority of their sales for the entire year. While this can be nerve wracking for management, these time periods tend to see huge volumes, and can be extremely profitable for the company. But when merchants slow their buying trends, the company’s input costs increase, and customers reduce their buying activity, margins and revenues get crushed. This is what happened to Mattel Inc. (MAT - Free Report) , our Zacks Bear of the Day.
This Zacks Ranked #5 (Strong Sell) company designs, manufactures, and markets a broad variety of family products on a worldwide basis through both sales to retailers and direct to consumers. Mattel's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines, to design and develop innovative new products and product lines, and successfully market those products and product lines.
Recent Earnings Results
On January 25th the company posted Q4 16 earnings results where missed both the Zacks consensus earnings and revenue expectations. The company saw year over year declines in several key areas; worldwide net sales -4%, worldwide gross sales -3%, reported operating income -4%, reported EPS -14.8%, net cash flows from operating activities -19.7%, and gross margins fell by 240 basis points. On a regional view, the company saw year over year declines; net sales North America -2%, net sales International -8%, and gross sales North America -1%, gross sales International -6%.
Management’s Take
According to Christopher Sinclair, Chairman and CEO, “Our results were negatively impacted by a number of industry-wide challenges, including a significant U.S. toy category slowdown in the holiday period, and increased forex headwinds. And while our sales at retail remained strong, the slowdown triggered elevated retail promotional activity and decreased shipping, all of which had a significant impact on our gross margin."
Price and Earnings Consensus Graph
As you can see in the price and earnings estimate graph below, 2017 estimates and current stock price have sharply declined.
Mattel, Inc. Price and Consensus
Mattel, Inc. Price and Consensus | Mattel, Inc. Quote
Declining Earnings Estimates
Due to the poor earnings report, earnings estimates for Q1 17, Q2 17, FY 17 and FY 18 have all seen declines over the past 7 days; Q1 17 fell from -$0.07 to -$0.13, Q2 17 slipped from $0.04 to $0.02, FY 17 dropped from $1.71 to $1.43, and FY 18 moved lower from $1.90 to $1.68.
Bottom Line
Mattel, has missed expectations in three out of the last four holiday quarters. While management has had recent success in stabilizing their core brands, this holiday miss makes the 2017 story a bit murky. Further, due to the deceleration in retail sell-through in December, retailers limited their orders which caused inventories to increase for Mattel. This extra inventory will weigh on 2017 sales.
If you are inclined to invest in the Toys/Games/Hobbies segment, you would be best served to wait for a better entry point as every member of the segment has a Zacks Rank #3 (Hold) or lower.
Long-Term Buys You Won't See in the News
To end on a positive note, you're invited to see the best long-term trades Zacks Research is uncovering today. These moves have double and triple-digit profit potential and are rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>