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Mattel (MAT) Stock Plunges as Q4 Earnings & Revenues Lag

Zacks Equity Research

Shares of Mattel, Inc. MAT tumbled nearly 11% in after-hours trading on Jan 25, after the company posted lower-than-expected earnings and revenue for the fourth quarter of 2016.

Earnings & Revenue Discussion

Mattel’s adjusted earnings per share of 52 cents were lower than the Zacks Consensus Estimate of 71 cents. Moreover, the figure compared unfavorably with the year-ago quarter earnings of 63 cents per share on account of lower sales. Notably, adjusted earnings exclude restructuring costs.

Revenues of $1.83 billion slipped 6% year over year in constant currency and missed the consensus mark of $1.98 billion by 7.6%. Sales declined 8% year over year, including the impact of foreign currency.
 

Quarter Highlights

Gross sales fell 5% year over year due to a decline at Mattel Girls & Boys Brands. At constant currency, gross sales were down 1%.

Gross sales in North America (including the U.S., Canada and American Girl) fell 5%, while that in the International region tumbled 4% mainly due to currency headwinds. Meanwhile, on a constant currency basis, gross sales in North America still declined 5% while the same was up 4% year over year in the International region.

Notably, gross margin in the reported quarter decreased 320 bps to 47.0% from 50.2% recorded in the year-ago quarter, largely due to currency headwinds and elevated discounting.

Meanwhile, adjusted operating income for the quarter was $269.2 million, lower than the prior-year quarter figure of $306.3 million due to lower revenues.

Segment Details

The company reports results under four segments, namely, Mattel Girls & Boys Brands, Fisher-Price Brands, American Girl Brands, and Construction and Arts & Crafts Brands.

At constant currency, worldwide gross sales at Mattel Girls & Boys Brands declined 3% to $1.05 billion year over year on the back of a 35% plunge in the Other Girls brand. However, a 1% surge in Barbie sales, 18% increase in the Wheels category and 2% growth in the Entertainment business, in constant currency, somewhat offset the losses.

Gross sales at Fisher-Price Brands, which includes Fisher-Price Core, Fisher-Price Friends and Power Wheels, climbed 2% year over year to $607.7million at constant currency.

Gross sales at American Girl Brands were $283.9 million, up 5% from the year-ago quarter on a constant currency basis.

Gross sales at Construction and Arts & Crafts Brands, which includes the Mega Bloks and RoseArt brands, were $124.8 million, up 1% from fourth-quarter 2015 at constant currency.

Mattel, Inc. Price, Consensus and EPS Surprise

 

Mattel, Inc. Price, Consensus and EPS Surprise | Mattel, Inc. Quote

Full Year 2016 Results

For the year, the company reported adjusted earnings of $1.06 per share, lagging the Zacks Consensus Estimate of $1.27 and the year-ago earnings figure of $1.27 by 27.6% each.

Revenues of $5.46 billion missed the Zacks Consensus Estimate of $5.58 billion by 2.2%. Further, revenues decreased 4% from the year-ago level.

Zacks Rank & Stocks to Consider

Mattel presently has a Zacks Rank #4 (Sell). Better-ranked stocks in the broader consumer discretionary sector include:

Planet Fitness, Inc. PLNT with a Zacks Rank #2 (Buy). The company has posted positive earnings surprises in each of the trailing four quarters, with an average beat of 16.28%.

SeaWorld Entertainment, Inc. SEAS is also a Zacks Rank #2 company. For fiscal 2017, its EPS is expected to grow a staggering 159%, while the expectation of the analysts from the industry is pegged at 14.8%.

Extended Stay America, Inc. STAY has also beaten estimates in each of its trailing four quarters, recording an average beat of 8.02%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Mattel, Inc. (MAT): Free Stock Analysis Report
 
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