Mattel Profits, Surpasses Estimates

Mattel Inc. (MAT) has reported first-quarter earnings of 7 cents per share. It is quite a revelation, considering that the company was expected to report a loss of 2 cents per share according to the Zacks Consensus Estimate. The company had incurred a loss of 14 cents in the year-ago period.

The better-than-expected results were primarily driven by robust sales of its core brands such as Barbie and Hot Wheels and its licensed toy lines, particularly newer ones like the World Wrestling Entertainment, Thomas and Friends, and Toy Story. Mattel is also focused on controlling its expenses and has reaped its benefits.

Worldwide net sales increased 12% from the prior-year quarter to $880.1 million. Both U.S. and International gross sales rose 12% year-over-year. Mattel reported an operating income of $45.2 million, compared with an operating loss of $55.2 million in the year-ago quarter.

Worldwide gross sales for the Mattel Girls & Boys Brands business unit climbed 14% versus the last year. Worldwide gross sales for Barbie increased 5% over the last year while Hot Wheels were up 9%. Core Fisher-Price sales increased 5% while the American Girl line increased 6% compared with the prior-year period. Gross margin was 49.1%, up 510 basis points versus the prior-year period. Selling, general and administrative expenses as a percentage of net sales decreased 720 bps to 33.2%.

The company's rival, Hasbro Inc. (HAS) is scheduled to report its earnings on Monday.

Mattel has an industry leading position, a strong balance sheet and continues to experience the gains of its cost containment initiatives. Its focus on top line growth, margin expansion and cash conservation also augur well.

Considering the robust demand for Mattel's products, we also anticipate an improvement in top line in the upcoming quarters. The market has also responded positively to the better-than expected earnings and the share is trading at a premium.

Mattel Profits, Surpasses Estimates