DA Davidson has maintained a Buy rating on Mattel Inc . (NASDAQ: NASDAQ:MAT) with a steady price target of $27.00.
The firm's analyst highlighted Mattel's third-quarter performance, noting a sales shortfall but an earnings per share (EPS) victory, driven by significant year-over-year gross margin growth.
The analyst pointed out that Mattel's operating profit remained unchanged compared to the third quarter of 2023, which had seen a boost from the Barbie movie.
Despite a challenging environment with an anticipated moderate toy industry decline in 2024, Mattel has revised its sales outlook, excluding foreign exchange impacts, to flat or slightly down from previously flat expectations.
The analyst expressed skepticism about the revised sales guidance but considered the higher end of the EPS forecast of $1.45 achievable. As a result, DA Davidson slightly reduced its 2025 EPS estimate for Mattel by $0.06 to $1.52, opting for a cautious stance ahead of the company's guidance announcement.
In other recent news, toy manufacturer Mattel Inc. has exceeded profit expectations due to efficient cost management, even as it revises its annual sales outlook downwards. The company has increased its yearly cost savings goal to around $75 million, part of a broader strategy to achieve $200 million in cost reductions by 2026. Mattel has also adjusted its gross margin forecast for the year, now expecting it to hit 50%, a rise from the previously projected range of 48.5% to 49%.
For 2024, Mattel has moderated its net sales expectations to be flat or slightly lower compared to the $5.44 billion reported last year. This change is due to a shorter holiday shopping period, prompting retailers to offer early discounts on toys. Mattel's net sales fell by 4% to $1.84 billion in the third quarter, marking the third consecutive quarter of decreases.
Despite a decrease in demand for Barbie-related merchandise following last year's "Barbie" movie, Mattel is maintaining its projected adjusted earnings per share for the year at $1.35 to $1.45. The company reported adjusted earnings of $1.14 per share for the quarter ending September 30, surpassing the analyst estimate of 95 cents per share.
InvestingPro Insights
Mattel's financial health and market position offer additional context to DA Davidson's analysis. According to InvestingPro data, Mattel's market cap stands at $6.04 billion, with a P/E ratio of 19.17, suggesting a moderate valuation relative to earnings. The company's revenue for the last twelve months as of Q2 2024 was $5.43 billion, with a revenue growth of 7.3% over the same period.
InvestingPro Tips highlight Mattel's financial strengths. The company boasts a perfect Piotroski Score of 9, indicating strong financial health. Management has been aggressively buying back shares, which could signal confidence in the company's future prospects. Additionally, net income is expected to grow this year, aligning with DA Davidson's cautious optimism about Mattel's earnings potential.
These insights complement the analyst's view on Mattel's ability to manage earnings amid industry challenges. The company's low price volatility and the fact that liquid assets exceed short-term obligations suggest stability, which could be reassuring for investors considering the revised sales outlook.
For readers interested in a deeper dive into Mattel's financials and market position, InvestingPro offers 5 additional tips and a comprehensive set of financial metrics.
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