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Mattel (MAT) Stock Down Despite Q3 Earnings & Revenue Beat
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Mattel, Inc. (MAT - Free Report) reported third-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Also, the top and bottom lines increased on a year-over-year basis.
Despite the solid results, MAT’s shares declined 8.3% in the after-hour trading session on Oct 25. Negative investor sentiments were witnessed as the company cited a challenging macroeconomic environment. The company remains cautious of the high volatility impact on consumer demand, acting as a headwind for the upcoming holiday season.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of $1.08, beating the Zacks Consensus Estimate of 87 cents. In the year-ago quarter, MAT reported adjusted EPS of 82 cents.
Net sales during the quarter amounted to $1.92 billion, outpacing the Zacks Consensus Estimate of $1.8 billion. The top line increased 9% (on a reported basis) and 7% (on a constant-currency or cc basis), year over year. The upside was driven by pent-up consumer demand and solid Barbie movie-related toy line performance.
Net sales in the North America segment increased 10% year over year on a reported basis and at cc. The International segment’s net sales increased 10% (as reported) and 3% (at cc) year over year. Our model estimated North America and International revenues to increase 5.3% and 1.2% year over year, respectively. During the quarter, net Sales in the American Girl segment dropped 13% year over year on a reported basis and at cc.
In the North America segment, gross billings increased 10% (as reported and at cc) year over year.
Gross billings in the International segment increased 9% (on a reported basis) and 2% (at cc) year over year. The segment benefitted from the solid performances of Dolls (including Disney Princess and Disney Frozen, Monster High, and Barbie) and Vehicles (Hot Wheels). This was partially negated by the dismal performances of Action Figures, Building Sets, Games and Other (primarily Action Figures).
Our model predicted North America and International gross billings to rise 5.5% and 1.6% year over year, respectively.
Brand-Wise Worldwide Sales
Mattel, through its subsidiaries, sells a broad range of toys. These items are grouped under different brands — Barbie, Hot Wheels, Fisher-Price and Other.
Worldwide gross billings by Mattel Power Brands increased 9% (on a reported basis) and 6% (at cc) year over year to $ 2.1 billion. The Barbie brand witnessed a rise of 16% (on a reported basis) and 14% (at cc) year over year.
Gross billings at the Hot Wheels brand rose 22% (on a reported basis) and 19% (at cc) year over year. Gross billings at Fisher-Price were down 1% (on a reported basis) and 3% (at cc) year over year. Gross billings at Other increased 1% (on a reported basis) but declined 2% (at cc) year over year.
Operating Results
During the third quarter, the company’s adjusted gross margin came in at 51%, up 270 basis points year over year. The upside was attributed to benefits related to the Barbie movie, pricing, savings from the Optimizing for Growth program and cost deflation. However, unfavorable fixed cost absorption and supply chain costs partially offset this.
During the quarter under discussion, adjusted other selling and administrative expenses increased 8% year over year to $347.5 million. An increase in incentive compensation, salary and market-related pay drove the upside. This was partially offset by savings from the Optimizing for Growth program.
Balance Sheet
As of Sep 30, 2023, cash and cash equivalents were $455.7 million compared with $349 million as of Sep 30, 2022. Total inventories at the end of the third quarter came in at $790.5 million compared with $1,083.8 million reported in the prior-year quarter.
Long-term debt (as of Sep 30, 2023) was $2,328.9 million compared with $2,324.5 million as of Sep 30, 2022. Shareholders’ equity was $2,035.5 million.
Outlook
For 2023, the company expects adjusted gross margin is expected to be in the range of 47-48% compared with the previous expectation of 47%.
Adjusted EBITDA is projected at $925-$975 million compared with prior anticipation of $900-$950 million.
Capital expenditures are expected to be in the range of $175-$200 million compared with $187 million reported in 2022. MAT anticipates 2023 adjusted EPS to be between $1.15 and $1.25 compared with the prior expectation of $1.10 and $1.20. The Zacks Consensus Estimate for 2023 earnings is currently pegged at $1.22.
Live Nation Entertainment, Inc. (LYV - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 34.6% on average. Shares of LYV have declined 0.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 21.6% and 59.4%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) sports a Zacks Rank #1. OSW has a trailing four-quarter earnings surprise of 42.6% on average. Shares of OSW have increased by 9% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates a rise of 44.5% and 117.9%, respectively, from the year-ago period’s levels.
Caesars Entertainment, Inc. (CZR - Free Report) carries a Zacks Rank #2 (Buy). CZR has a trailing four-quarter earnings surprise of 74.3% on average. Shares of the company have dropped 9.4% in the past year.
The Zacks Consensus Estimate for CZR’s 2023 sales and EPS indicates a rise of 7% and 214.4%, respectively, from the year-ago period’s levels.
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Mattel (MAT) Stock Down Despite Q3 Earnings & Revenue Beat
Mattel, Inc. (MAT - Free Report) reported third-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Also, the top and bottom lines increased on a year-over-year basis.
Despite the solid results, MAT’s shares declined 8.3% in the after-hour trading session on Oct 25. Negative investor sentiments were witnessed as the company cited a challenging macroeconomic environment. The company remains cautious of the high volatility impact on consumer demand, acting as a headwind for the upcoming holiday season.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of $1.08, beating the Zacks Consensus Estimate of 87 cents. In the year-ago quarter, MAT reported adjusted EPS of 82 cents.
Mattel, Inc. Price, Consensus and EPS Surprise
Mattel, Inc. price-consensus-eps-surprise-chart | Mattel, Inc. Quote
Net sales during the quarter amounted to $1.92 billion, outpacing the Zacks Consensus Estimate of $1.8 billion. The top line increased 9% (on a reported basis) and 7% (on a constant-currency or cc basis), year over year. The upside was driven by pent-up consumer demand and solid Barbie movie-related toy line performance.
Net sales in the North America segment increased 10% year over year on a reported basis and at cc. The International segment’s net sales increased 10% (as reported) and 3% (at cc) year over year. Our model estimated North America and International revenues to increase 5.3% and 1.2% year over year, respectively. During the quarter, net Sales in the American Girl segment dropped 13% year over year on a reported basis and at cc.
In the North America segment, gross billings increased 10% (as reported and at cc) year over year.
Gross billings in the International segment increased 9% (on a reported basis) and 2% (at cc) year over year. The segment benefitted from the solid performances of Dolls (including Disney Princess and Disney Frozen, Monster High, and Barbie) and Vehicles (Hot Wheels). This was partially negated by the dismal performances of Action Figures, Building Sets, Games and Other (primarily Action Figures).
Our model predicted North America and International gross billings to rise 5.5% and 1.6% year over year, respectively.
Brand-Wise Worldwide Sales
Mattel, through its subsidiaries, sells a broad range of toys. These items are grouped under different brands — Barbie, Hot Wheels, Fisher-Price and Other.
Worldwide gross billings by Mattel Power Brands increased 9% (on a reported basis) and 6% (at cc) year over year to $ 2.1 billion. The Barbie brand witnessed a rise of 16% (on a reported basis) and 14% (at cc) year over year.
Gross billings at the Hot Wheels brand rose 22% (on a reported basis) and 19% (at cc) year over year. Gross billings at Fisher-Price were down 1% (on a reported basis) and 3% (at cc) year over year. Gross billings at Other increased 1% (on a reported basis) but declined 2% (at cc) year over year.
Operating Results
During the third quarter, the company’s adjusted gross margin came in at 51%, up 270 basis points year over year. The upside was attributed to benefits related to the Barbie movie, pricing, savings from the Optimizing for Growth program and cost deflation. However, unfavorable fixed cost absorption and supply chain costs partially offset this.
During the quarter under discussion, adjusted other selling and administrative expenses increased 8% year over year to $347.5 million. An increase in incentive compensation, salary and market-related pay drove the upside. This was partially offset by savings from the Optimizing for Growth program.
Balance Sheet
As of Sep 30, 2023, cash and cash equivalents were $455.7 million compared with $349 million as of Sep 30, 2022. Total inventories at the end of the third quarter came in at $790.5 million compared with $1,083.8 million reported in the prior-year quarter.
Long-term debt (as of Sep 30, 2023) was $2,328.9 million compared with $2,324.5 million as of Sep 30, 2022. Shareholders’ equity was $2,035.5 million.
Outlook
For 2023, the company expects adjusted gross margin is expected to be in the range of 47-48% compared with the previous expectation of 47%.
Adjusted EBITDA is projected at $925-$975 million compared with prior anticipation of $900-$950 million.
Capital expenditures are expected to be in the range of $175-$200 million compared with $187 million reported in 2022. MAT anticipates 2023 adjusted EPS to be between $1.15 and $1.25 compared with the prior expectation of $1.10 and $1.20. The Zacks Consensus Estimate for 2023 earnings is currently pegged at $1.22.
Zacks Rank & Key Picks
Mattel currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Live Nation Entertainment, Inc. (LYV - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 34.6% on average. Shares of LYV have declined 0.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 21.6% and 59.4%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited (OSW - Free Report) sports a Zacks Rank #1. OSW has a trailing four-quarter earnings surprise of 42.6% on average. Shares of OSW have increased by 9% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates a rise of 44.5% and 117.9%, respectively, from the year-ago period’s levels.
Caesars Entertainment, Inc. (CZR - Free Report) carries a Zacks Rank #2 (Buy). CZR has a trailing four-quarter earnings surprise of 74.3% on average. Shares of the company have dropped 9.4% in the past year.
The Zacks Consensus Estimate for CZR’s 2023 sales and EPS indicates a rise of 7% and 214.4%, respectively, from the year-ago period’s levels.