Although JAKKS Pacific, Inc. (NASDAQ: JAKK) reported disappointing results for the second quarter, management seemed optimistic about the back half of the year, citing a good start to the third quarter and a strong movie lineup ahead, according to BMO Capital Markets.
BMO’s Gerrick Johnson maintained a Market Perform rating on JAKKS Pacific with a price target of $1.
JAKKS Pacific’s disappointing results came amid other publicly traded toy companies posting better-than-expected earnings for the second quarter, Johnson said.
The company reported adjusted loss per share of 83 cents, much worse than the previous year’s loss of 72 cents per share and significantly below the Street’s estimate of a loss of 56 cents.
Revenue declined by 10% to $95.2 million, while came in below the consensus expectation of $99.2 million. Johnson mentioned that this performance was the worst among public toy companies and revenue declined despite the quarter benefiting from a late Easter.
Management cited unfavorable product mix and higher closeout sales as the reasons for the massive gross margin contraction from 26.4% to 18.6%.
“JAKK seems the most poorly positioned of the companies we cover from a tariff perspective, with substantially all of its production coming from China,” the analyst wrote in a note. Citing the company’s track record of overpromising and underdelivering, Johnson recommended remaining on the sidelines until there were “more signs of sustainable growth.”
Shares of JAKKS Pacific traded around 61 cents at time of publishing on Wednesday.
DA Davidson Cuts JAKKS Pacific Price Target After Disappointing Q1 EBITDA, Gross Margin Decline
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|Feb 2018||Maintains||Market Perform||Market Perform|
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