Jakks (JAKK) Up 11.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Jakks Pacific (JAKK). Shares have added about 11.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Jakks due for a pullback? 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 drivers.
JAKKS Pacific Q1 Earnings & Revenues Miss Estimates
JAKKS Pacific reported first-quarter 2020 financial numbers wherein both earnings and revenues missed the Zacks Consensus Estimate. The bottom line lagged the consensus mark in four of the trailing five quarters.
The company reported adjusted loss of 72 cents per share, wider than the Zacks Consensus Estimate of a loss of 64 cents. However, the figure narrowed from the year-ago loss of $1.0 per share.
Revenues of $66.6 million missed the consensus mark of $76 million. Moreover, the top line declined 6% year over year. Strong sales of Disney Frozen 2 products were overshadowed by decline in other lines.
The company announced that in the quarter it witnessed strong sales of products tied to Frozen 2, Sonic the Hedgehog and Nintendo, and the company’s own brands such as Fly Wheels, Kitten Catfe, Maui Wave Hoop, and Disguise Halloween costumes. However, gains were offset by dismal sales of older products. The company expects retail disruption to persist in the second half of the year due to the coronavirus pandemic.
Operating Highlights
In the reported quarter, gross margin was 24.6%, up 440 basis points (bps) from the prior-year level. Margins benefited from improved product margins as a percent of sales. Adjusted EBITDA came in at a negative $13.9 million compared with a negative of $17.1 million reported in the prior-year quarter.
Balance Sheet
As of Mar 31, 2020, cash and cash equivalents amounted to $44 million compared with $66.3 million as of Dec 31, 2019. Inventory decreased to $48.2 million from $54.3 million at 2019 end. Debt, non-current portion, net as of Mar 31 totaled $169.4 million, up from $175 million at the end of 2019.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -18.18% due to these changes.
VGM Scores
At this time, Jakks has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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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