Mattel, Inc. MAT has reported better-than-expected second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate for the fourth straight quarter. Also, its revenues surpassed the consensus estimate for the third consecutive quarter.
The company reported adjusted loss of 25 cents, which was narrower than the Zacks Consensus Estimate of loss of 35 cents. The second quarter’s loss compared favorably with the prior-year quarter’s loss of 54 cents.
Earnings beat and increased revenues may have gone well with investors, as shares of Mattel gained 5.5% in the after-hours trading on Jul 25. However, the company’s declining revenues until the first quarter have led its shares to move down 19.9% over the past year. The industry also recorded a decline of 28.8% in the same period.
Net sales of $860.1 million surpassed the consensus estimate of $821 million and increased 2.3% year over year. On a constant-currency basis, sales grew 5% from the prior-year quarter.
Worldwide gross sales were up 0.8% year over year (as reported) and increased nearly 4% at constant currency. In North America, gross sales increased 1%, both as reported and at constant currency. On a reported basis, net sales from the same region grew 2% year over year.
Meanwhile, in the International region, gross sales increased 3% (as reported), driven by growth in Action Figures, Building Sets and Games (including Toy Story 4 partially offset by Jurassic World), Dolls, and Vehicles. This growth was partially offset by a decline in Infant, Toddler and Preschool (including Fisher-Price Core, and Thomas & Friends).
Further, gross sales increased 9% in constant currency, driven by growth in Action Figures, Building Sets and Games (including Toy Story 4 partially offset by Jurassic World), Dolls, and Vehicles. This growth was partially offset by a decline in Infant, Toddler and Preschool (including Fisher-Price Core, and Thomas & Friends).
Brand-Wise Worldwide Sales
Mattel, through its subsidiaries, sells a broad range of toys. These items are grouped under four wide categories — Mattel Girls & Boys Brands, Fisher-Price Brands, American Girl Brands, and Construction and Arts & Crafts Brands.
As reported, worldwide gross sales at Mattel Power Brands increased 1% to $962.3 million year over year. The metric increased 4% on a constant-currency basis. Also, the Barbie brand witnessed 9% growth as reported and 13% in constant currency, owing to positive POS momentum. Also, gross sales at the Hot Wheels brand increased 5% on a reported basis and 9% in constant currency, courtesy of Hot Wheels' 50th anniversary. At the Fisher-Price and Thomas & Friends brands, gross sales were down 6% as reported and 4% in constant currency. The same at American Girl decreased 23% as reported and in constant currency primarily due to lower sales in proprietary retail and direct channels.
Adjusted gross margin expanded to 39.9% from 30.4% in the year-ago quarter, buoyed by savings from the Structural Simplification program and lower foreign exchange.
Adjusted other selling and administrative expenses decreased 6% to $289.5 million. The improvements were primarily driven by the benefit of Structural Simplification, partially offset by Toys “R” Us bad debt recoveries in the second quarter of 2018.
Mattel, Inc. Price, Consensus and EPS Surprise
Mattel, Inc. price-consensus-eps-surprise-chart | Mattel, Inc. Quote
As of Jun 30, 2019, the company’s cash and equivalents were $194.1 million compared with $594.5 million as of Dec 31, 2018. Total inventories as of the end of the second quarter increased 33.1% year over year.
The company’s long-term debt summed $2.855 billion as of Jun 30, 2019, lower than $2.851 billion as of Dec 31, 2018. Shareholder’s equity was $421.3 million.
Zacks Rank & Stocks to Consider
Mattel currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the industry are Hasbro HAS, Electronic Arts EA and Take-Two Interactive Software TTWO. While Hasbro sports a Zacks Rank #1 (Strong Buy) at present, Electronic Arts and Take-Two Interactive Software carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hasbro, Electronic Arts and Take-Two Interactive Software’s earnings over the long term are expected to increase 10.7%, 16.5% and 11.2%, respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>
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
Electronic Arts Inc. (EA) : Free Stock Analysis Report
Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
Mattel, Inc. (MAT) : Free Stock Analysis Report
Hasbro, Inc. (HAS) : Free Stock Analysis Report
To read this article on Zacks.com click here.