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Jakks (JAKK) Down 28.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Jakks Pacific (JAKK - Free Report) . Shares have lost about 28.4% in that time frame, underperforming the S&P 500.

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

JAKKS Pacific Reports Wider-Than-Expected Q1 Loss

JAKKS Pacific incurred adjusted loss of 98 cents per share in first-quarter 2019, wider than the Zacks Consensus Estimate of loss of 56 cents. The company incurred loss of 85 cents per share in the prior-year quarter.

Net sales totaled $70.8 million, which lagged the Zacks Consensus Estimate by 10%. The top line also fell 23.8% on a year-over-year basis. The company expects sales to grow by nearly 5% in 2019.

Following the quarterly results, shares of the company decreased 2.9% in after-hours trading on May 9. Notably, the challenging industry scenario for traditional toymakers hurt JAKKS Pacific’s first-quarter results. The Toys ‘R’ Us liquidation was another reason behind its disappointing performance in the quarter under review.

Operating Highlights

In the reported quarter, gross margin was 20.2%, down 450 basis points (bps) from the prior-year quarter. Adjusted EBITDA was a negative $17.1 million compared with a negative $14.6 million in the prior-year quarter.

Balance Sheet

As of Mar 31, 2019, cash and cash equivalents amounted to $42.4 million compared with $53.3 million as of Dec 31, 2018. Inventory decreased to $44.7 million from $53.9 million at the end of Dec 31, 2018. Long-term debt, as of Mar 31, 2019, totaled $142.4 million, up from $139.8 million at the end of 2018.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Jakks has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

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

Outlook

Jakks has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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