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Here's Why You Should Hold Mattel (MAT) Stock in Portfolio Now
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Mattel, Inc. (MAT - Free Report) is benefiting from product portfolio expansion strategies across its key brands, the Optimizing for Growth program and capitalizing on strong demand for Hot Wheels. However, ongoing inflation, increased expenses, high debt and dismal North America sales performance are primary concerns.
With a Zacks Rank #3 (Hold), this company boasts a noteworthy long-term earnings growth rate of 9.5%. To gain a deeper understanding, let's explore the reasons why investors should consider retaining this stock.
Growth Drivers
Benefiting from a robust assortment of products encompassing core brands, licensed brands and profitable product affiliations, Mattel maintains a favorable growth stance. Thanks to its popularity among both young boys and girls, flagship brands like Hot Wheels have consistently held top positions across various product sectors for an extended period. Furthermore, Mattel has expanded its reach into additional consumer product categories like clothing, fashion and accessories as part of its brand-building efforts.
The return of Disney Princess and Frozen to Mattel’s portfolio has driven the company’s second-quarter results and is consistently building momentum along with Monster High. Also, the launch of a variety of toys and products related to the Barbie movie has created demand in the market, being sold out across major distribution channels from release to date.
MAT continues to expand its franchise brands with inaugurations of creative products like Hot Wheels Racerverse, which is a new character-driven play system. Also, upcoming introduction of digital game Hot Wheels Unleashed 2: Turbocharge in fall 2023 will further expand Mattel’s portfolio.
Strong performance of Hot Wheels continues to impress investors. In 2022, gross billings at this brand rose 8% (on a reported basis) and 13% (at cc) year over year. During second-quarter 2023, the brand’s gross billings climbed 10% (on a reported basis) and 9% (at cc) to $315.2 million, year over year.
Mattel has been witnessing an improving sales trend for Hot Wheels and is quite confident about the brand’s long-term prospects. Moreover, its initiatives of product portfolio expansion along with other digital advancements add to growth trend.
Through its current cost-saving program, Mattel remains focused on achieving cumulative cost savings, thus, enhancing margins. In 2021, the company initiated a new multi-year program — Optimizing for Growth. The program contributed $106 million of incremental savings in cost of goods in 2022.
In the second quarter of 2023, it generated $24 million in savings through the execution of Optimizing for Growth program. Mattel is on track for the program to deliver its savings goal of $300 million by 2023.
Image Source: Zacks Investment Research
Concerns
In the second quarter of 2023, the adjusted gross margin remained flat year over year at 44.9%. The scenario was primarily driven by cost inflation and an unfavorable fixed expense absorption. Inventory management expenditures, including higher close-out sales and inventory obsolescence expenses, added to the woes. The challenging environment is likely to persist for some time.
In the second quarter, North America’s gross billings declined 18% (as reported and at cc) year over year. The downside was primarily due to dismal performance of Action Figures, Building Sets, Games and Other (including Action Figures), Infant, Toddler and Preschool (including Fisher-Price), and Vehicles (including Hot Wheels). Net sales in the North America segment plunged 18% year-over-year on a reported basis and at cc.
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 150.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS implies gains of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) currently flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 147.9%, on average. The stock has increased 42.9% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS suggests jumps of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) presently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 42.6%, on average. The stock has improved 19.2% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates rises of 44.5% and 110.7%, respectively, from the year-ago period’s levels.
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Here's Why You Should Hold Mattel (MAT) Stock in Portfolio Now
Mattel, Inc. (MAT - Free Report) is benefiting from product portfolio expansion strategies across its key brands, the Optimizing for Growth program and capitalizing on strong demand for Hot Wheels. However, ongoing inflation, increased expenses, high debt and dismal North America sales performance are primary concerns.
With a Zacks Rank #3 (Hold), this company boasts a noteworthy long-term earnings growth rate of 9.5%. To gain a deeper understanding, let's explore the reasons why investors should consider retaining this stock.
Growth Drivers
Benefiting from a robust assortment of products encompassing core brands, licensed brands and profitable product affiliations, Mattel maintains a favorable growth stance. Thanks to its popularity among both young boys and girls, flagship brands like Hot Wheels have consistently held top positions across various product sectors for an extended period. Furthermore, Mattel has expanded its reach into additional consumer product categories like clothing, fashion and accessories as part of its brand-building efforts.
The return of Disney Princess and Frozen to Mattel’s portfolio has driven the company’s second-quarter results and is consistently building momentum along with Monster High. Also, the launch of a variety of toys and products related to the Barbie movie has created demand in the market, being sold out across major distribution channels from release to date.
MAT continues to expand its franchise brands with inaugurations of creative products like Hot Wheels Racerverse, which is a new character-driven play system. Also, upcoming introduction of digital game Hot Wheels Unleashed 2: Turbocharge in fall 2023 will further expand Mattel’s portfolio.
Strong performance of Hot Wheels continues to impress investors. In 2022, gross billings at this brand rose 8% (on a reported basis) and 13% (at cc) year over year. During second-quarter 2023, the brand’s gross billings climbed 10% (on a reported basis) and 9% (at cc) to $315.2 million, year over year.
Mattel has been witnessing an improving sales trend for Hot Wheels and is quite confident about the brand’s long-term prospects. Moreover, its initiatives of product portfolio expansion along with other digital advancements add to growth trend.
Through its current cost-saving program, Mattel remains focused on achieving cumulative cost savings, thus, enhancing margins. In 2021, the company initiated a new multi-year program — Optimizing for Growth. The program contributed $106 million of incremental savings in cost of goods in 2022.
In the second quarter of 2023, it generated $24 million in savings through the execution of Optimizing for Growth program. Mattel is on track for the program to deliver its savings goal of $300 million by 2023.
Image Source: Zacks Investment Research
Concerns
In the second quarter of 2023, the adjusted gross margin remained flat year over year at 44.9%. The scenario was primarily driven by cost inflation and an unfavorable fixed expense absorption. Inventory management expenditures, including higher close-out sales and inventory obsolescence expenses, added to the woes. The challenging environment is likely to persist for some time.
In the second quarter, North America’s gross billings declined 18% (as reported and at cc) year over year. The downside was primarily due to dismal performance of Action Figures, Building Sets, Games and Other (including Action Figures), Infant, Toddler and Preschool (including Fisher-Price), and Vehicles (including Hot Wheels). Net sales in the North America segment plunged 18% year-over-year on a reported basis and at cc.
Key Picks
Some better-ranked stocks from the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 150.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS implies gains of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) currently flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 147.9%, on average. The stock has increased 42.9% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS suggests jumps of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) presently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 42.6%, on average. The stock has improved 19.2% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates rises of 44.5% and 110.7%, respectively, from the year-ago period’s levels.