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JAKKS Pacific (JAKK) Q4 Loss Narrower than Expected, Stock Up

Zacks Equity Research

Shares of JAKKS Pacific, Inc. JAKK were up nearly 13% in yesterday’s trading session after the company reported a narrower-than-expected loss and better-than-expected sales in the fourth quarter of 2016.

Quarter Discussion

The California-based company’s loss of 47 cents per share was narrower than the prior-year quarter loss of 50 cents and the Zacks Consensus Estimate of a loss of 71 cents. The improvement was driven by higher top line and better margins. Lower share count owing to share buybacks also pared losses on a year-over-year basis.

JAKKS Pacific’s revenues increased 2.2% year over year to $167 million and also exceeded the Zacks Consensus Estimate of $160 million by 4.4%.

Behind the Headline Numbers

Gross margin in the quarter was 31.2%, up 90 basis points (bps) year over year, driven by ongoing margin enhancement initiatives, partially offset by higher tooling amortization.

Operating margin was a negative 1.4%, an improvement from prior-year quarters figure of negative 4.2% on the back of higher gross margin and lower SG&A expenses, somewhat offset by higher marketing expenses.

Adjusted EBITDA (earnings before interest, taxes and amortization) was $4 million, comparing favorably with the year-ago quarter’s figure of negative $2.1 million, due to the higher margins on slightly higher sales in 2016.

2016 Results

JAKKS Pacific’s full-year adjusted earnings of 7 cents surpassed the Zacks Consensus Estimate of 4 cents by 75%. However, the figure plunged considerably from the year-ago quarter figure of 71 cents, which reflects a decrease in revenues.

Full-year revenues of $706.6 million came above the Zacks Consensus Estimate of $698.2 billion by 1.2% but decreased 5.2% year over year.

JAKKS Pacific, Inc. Price, Consensus and EPS Surprise

 

JAKKS Pacific, Inc. Price, Consensus and EPS Surprise | JAKKS Pacific, Inc. Quote

2017 View

For 2017, JAKKS Pacific expects higher net income, earnings per share and adjusted EBITDA on lower net sales compared to 2016. Moreover, the company expects enhanced profitability in 2017 with continual focus on building its base of evergreen brands and categories as well as entering new categories, creating a strong portfolio of new and existing licenses and developing owned IP and content.

Performance of Other Toymakers

Among other toymakers, Hasbro Inc. HAS reported better-than-expected fourth-quarter 2016 results, while Mattel Inc. MAT posted lower-than-expected results for the quarter.

Zacks Rank

JAKKS Pacific currently carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the same sector is Electronic Arts, Inc. EA carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Electronic Arts’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 32.94%. Further, for 2017, EPS is expected to grow 22.5%.

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JAKKS Pacific, Inc. (JAKK): Free Stock Analysis Report
 
Hasbro, Inc. (HAS): Free Stock Analysis Report
 
Mattel, Inc. (MAT): Free Stock Analysis Report
 
Electronic Arts Inc. (EA): Free Stock Analysis Report
 
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