Tuesday, April 12, 2011

Mattel Inc. (NASDAQ: MAT): Q1 Earnings Preview 2011


Mattel Inc. (NASDAQ: MAT), the world’s largest toymaker, is scheduled to release its first quarter earnings before the opening bell on Friday, April 15, 2011. Analysts, on average, expect the company to report earnings of 5 cents per share on revenue of $902.95 million. In the year ago quarter, the company reported earnings of 7 cents per share on revenue of $880.10 million.

Mattel, Inc., together with its subsidiaries, engages in the design, manufacture, and marketing of various toy products worldwide. Its products comprise fashion dolls and accessories, vehicles and playsets, and games and puzzles.

In the preceding fourth quarter, the El Segundo, California-based company's net income was $325.2 million compared to $328.4 million reported last year. On a per-share basis, earnings stood flat with last year at $0.89. Revenue grew 9 percent to $2.12 billion from last year's $1.96 billion. Analysts, on average, expected the company to report earnings of 86 cents per share on revenue of $2.09 billion.

The company has benefited from continued strong demand for its core toy brands -- Barbie, Hot Wheels, Fisher-Price and American Girl. At its last earnings call in February, Chief Executive Officer Robert Eckert told analysts on a conference call that the company gained market share in virtually every one of the (industry) segments -- dolls, vehicles, action figures, games, infant and preschool.

The company also plans to increase prices in the high single digit in 2011 to compensate for the rise in input cost and remains focused on achieving its long-term annual goal of 50% of gross margin and 15% to 20% of operating margins. Mattel plans to increase prices in the second quarter to offset rising costs of oil and labor in China, Chief Executive Officer Robert Eckert said on a conference call with analysts. “Our goal is to protect our margins,” Eckert said. Management remains focused on margin expansion through its cost-cutting initiatives and is thus targeting an additional cumulative cost savings of $150 million to be achieved by the end of 2012. Half the savings are expected from lower legal fees and the other half from the execution of round-two of the global cost-leadership initiative.

Going forward, the company’s product line looks strong with film releases including Cars 2 and Green Lantern in 2011 and Batman and Superman in 2012.

The consumer goods sector, more specifically the toy industry, has been taking measures to adapt to the changing times. After the recession instilled moderation in the hearts of customers, the sector has experienced trouble returning to its peak sales numbers. Higher oil and material costs have also weighed on results and forced some companies to begin taking actions in response to their dwindling margins. 

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 11.56 and PEG Ratio (5 yr expected) of 1.48. In terms of stock performance, Mattel shares have gained nearly 9% over the past year.

Full Disclosure: None.

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