U.S. Markets closed

JAKKS Pacific (JAKK) Posts Narrower-Than-Expected Q4 Loss

Zacks Equity Research
Positive Development on Trade War Front

JAKKS Pacific, Inc. JAKK incurred an adjusted loss of 37 cents per share in fourth-quarter 2018, narrower than the Zacks Consensus Estimate of a loss of 49 cents. The company had incurred a loss of 57 cents per share in the prior-year quarter.

Net sales totaled $132.3 million, which lagged the Zacks Consensus Estimate of $120.8 million. The top line also fell 3.1% 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 increased more than 12% in after-hours trading on Feb 26. However, in the past six months, JAKKS Pacific has lost 22.6% compared with the S&P 500’s 3.6% decline.

Notably, the challenging industry scenario for traditional toymakers has hurt JAKKS Pacific’s fourth-quarter results. The Toys ‘R’ Us liquidation was another reason behind its disappointing performance in the quarter under review. Positive contribution of products like Incredibles 2, Harry Potter and Fancy Nancy, and properties like Morf Board, Perfectly Cute and TP Blaster, was overshadowed by the Toys ‘R’ Us bankruptcy. 

Operating Highlights

In the reported quarter, gross margin was 30.6%, up 790 basis points (bps) from the prior-year quarter. The upside can be attributed to non-recurring items recorded in fourth-quarter 2017 due to minimum guarantee shortfalls as well as inventory charges.

Adjusted EBITDA was a negative of $1.6 million compared with a negative of $6.8 million in the prior-year quarter.

Balance Sheet

As of Dec 31, 2018, cash and cash equivalents amounted to $58.2 million compared with $65 million as of Dec 31, 2017. Inventory increased to $53.9 million from $58.4 million at the end of Dec 31, 2017. Long-term debt, as on Dec 31, 2018, totaled $139.8 million, up from $133.5 million at the end of 2017.

Zacks Rank & Key Picks

JAKKS Pacific, which shares space with Hasbro, Inc. HAS, has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Take-Two Interactive Software, Inc. TTWO and Glu Mobile Inc. GLUU, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Take-Two Interactive Software reported better-than-expected earnings in each of the preceding four quarters, the average being 24.3%.

Glu Mobile’s long-term earnings are likely to grow by 15%.

Is Your Investment Advisor Fumbling Your Financial Future?

See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”

Click to get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Hasbro, Inc. (HAS) : Free Stock Analysis Report
Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
Glu Mobile Inc. (GLUU) : Free Stock Analysis Report
JAKKS Pacific, Inc. (JAKK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research