Why Mattel Fell Flat After Earnings

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When Mattel Inc. (NASDAQ: MAT) reported its most recent quarterly results after the markets closed on Thursday, the toy-maker said that it had $0.09 in earnings per share (EPS) and $1.56 billion in revenue. Consensus estimates from Thomson Reuters had called for $0.56 in EPS on revenue of $1.84 billion. In the same period of last year, Mattel posted EPS of $0.70 and $1.80 billion in revenue.

Worldwide net sales were down 13% as reported, and down 14% in constant currency. Also worldwide gross sales fell 13%, a drop of 15% in constant currency.

The company announced that it suspended the quarterly dividend beginning in the fourth quarter in order to increase financial flexibility, strengthen the balance sheet and facilitate strategic investments.

The company did not issue any guidance for the fourth quarter, but so far analysts are looking for $0.56 in EPS and $1.92 billion in revenue.

Following these results, a few analysts jumped on Mattel:

  • Jefferies has a Hold rating and cut its price target to $12.50 from $14.
  • MKM Partners cut its price target to $13 from $17.
  • Monness Crespi Hardt cut its price target to $18 from $22.
  • SunTrust Robinson cut its price target to $14 from $17.

Margo Georgiadis, CEO of Mattel, commented on the earnings results:

Our Q3 performance was clearly disappointing, led by compression in North America driven by Toys “R” Us filing for bankruptcy, tighter retailer inventory management and challenges with certain underperforming brands. Despite these challenges, we are making strong progress against our transformation plan, which we believe will deliver step change revenue growth and profitability. To accelerate progress toward these goals, with our new leadership team in place, we are taking bold steps to simplify our business and right size our cost structure in alignment with our strategy. This will enable us to move faster to realize our most attractive opportunities as well as to unlock significant resources to invest in our transformation. We are optimistic about the future of Mattel and our ability to reposition the company to drive enhanced returns for shareholders.

Shares of Mattel were last seen down about 15% at $13.05, with a consensus analyst price target of $18.50 and a 52-week range of $12.71 to $32.48.