Mattel (MAT) Up 3.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Mattel (MAT). Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mattel 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 catalysts.
Mattel Q4 Earnings & Revenues Miss, Gross Billings Up Y/Y
Mattel reported fourth-quarter 2023 results, wherein earnings and revenues missed the Zacks Consensus Estimate. However, the top and bottom lines increased on a year-over-year basis.
The company’s quarterly results reflect growth, driven by its diverse product offerings primarily in the North America segment. Success from the Barbie movie as well as notable progress in entertainment across film, television, digital and publishing bode well. However, this uptrend was partially offset by currency fluctuation risks.
Exceeding the quarter’s Optimizing for Growth cost savings program target was encouraging, thus positioning Mattel well to continue focusing on growing its IP-driven toy business and expand the entertainment offering through 2024.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of 29 cents, lagging the Zacks Consensus Estimate of 30 cents by 3.3%. The reported figure showcased 61.1% growth from the prior-year quarter’s adjusted EPS of 18 cents.
Net sales during the quarter amounted to $1.62 billion, missing the consensus estimate of $1.66 billion by 2.2%. The top line increased 16% (on a reported basis) and 14% (on a constant-currency or cc basis), year over year.
Net sales in the North America segment increased 32% year over year on a reported basis and at cc. The International segment’s net sales increased 3% (as reported) but declined 2% (at cc) year over year. During the quarter, net sales in the American Girl segment dropped 6% year over year on a reported basis and at cc.
In the North America segment, gross billings increased 33% (as reported and at cc) year over year.
Gross billings in the International segment increased 7% (on a reported basis) and 2% (at cc) year over year. The segment benefited from the solid performances of Dolls (including Disney Princess and Disney Frozen, Monster High, and Barbie) and Vehicles (mainly Hot Wheels). This was partially negated by the dismal performances of Action Figures, Building Sets, Games and Other (primarily Action Figures), along with Infant, Toddler, and Preschool (primarily Fisher-Price).
The quarter’s gross billings in the American Girl segment decreased 5% (as reported and at cc) year over year.
Brand-Wise Worldwide Sales
Mattel, through its subsidiaries, sells a broad range of toys. These items are grouped under different brands, Barbie, Hot Wheels, Fisher-Price and Other.
Worldwide gross billings by Mattel Power Brands increased 18% (on a reported basis) and 16% (at cc) year over year to $ 1.84 billion. The Barbie brand witnessed a rise of 27% (on a reported basis) and 24% (at cc) year over year.
Gross billings at the Hot Wheels brand rose 19% (on a reported basis) and 16% (at cc) year over year. Gross billings at Fisher-Price were up 13% (on a reported basis) and 11% (at cc) year over year. Gross billings at Other increased 14% (on a reported basis) and 12% (at cc) year over year.
Operating Results
During the fourth quarter of 2023, Mattel’s adjusted gross margin was 48.8%, up 570 basis points (bps) year over year. The upside was attributed to benefits related to the Barbie movie, pricing, favorable mix, savings from the Optimizing for Growth program, net of higher sales adjustments and cost deflation. However, unfavorable fixed cost absorption and supply-chain costs partially offset the positives.
During the quarter under discussion, adjusted other selling and administrative expenses increased 45% year over year to $408.8 million, and grew 510 bps as a percentage of net sales. The increase was mainly driven by higher incentive compensation.
2023 in a Glance
In 2023, Mattel’s net sales were flat (on a reported basis) and declined 1% (on a constant-currency or cc basis), year over year. It reported adjusted EPS of $1.23 in 2023, down from EPS of $1.25 reported in 2022.
During the year, Worldwide gross billings by Mattel Power Brands increased 1% (on a reported basis) but decreased 1% (at cc) year over year to $ 6.1 billion.
Adjusted gross margin was 47.5%, up 160 bps year over year. Adjusted other selling and administrative expenses increased 12% year over year to $1.42 billion, and grew 260 bps as a percentage of net sales
Balance Sheet
As of Dec 31, 2023, cash and cash equivalents were $1.26 billion compared with $761.2 million as of 2022 end. Total inventories at the end of the fourth quarter were $571.6 million compared with $894.1 million reported in the year-ago quarter.
Long-term debt (as of Dec 31, 2023) was $2.33 billion, on par with the reported value in 2022 end. Shareholders’ equity was $2.15 billion as of Dec 31, 2023.
2024 Outlook
For 2024, the company expects net sales to be comparable with the prior year on a constant currency basis.
The company expects adjusted gross margin to be in the range of 48.5-49%. Adjusted EBITDA is projected to be in the range of $975-$1,025 million.
Capital expenditures are expected to be in the range of $175-$200 million compared with $160 million reported in 2023. Mattel anticipates 2023 adjusted EPS to be between $1.35 and $1.45.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted -8.46% due to these changes.
VGM Scores
At this time, Mattel has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mattel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Mattel, Inc. (MAT) : Free Stock Analysis Report
