On Thursday, BofA Securities updated its outlook on Mattel Inc . (NASDAQ: NASDAQ:MAT), increasing the toy company's price target to $28 from the previous $26 while reiterating a Buy rating.
The adjustment follows Mattel's third-quarter earnings report, which revealed an adjusted EPS of $1.14, surpassing the analyst's estimate of $1.02. Mattel's performance was buoyed by a gross margin of 53.1%, exceeding expectations of 50.0%, with the improvement attributed to supply chain efficiencies, cost savings, favorable foreign exchange movements, and cost deflation.
Despite a 3% decline in overall gross billings due to a challenging comparison with the previous year's Barbie movie release, Mattel showed resilience. Excluding the impact of the movie, the company would have seen an increase in gross billings.
The point of sale for Mattel's products experienced a high single-digit percentage drop, primarily due to a double-digit percentage decline in Barbie sales. However, this was partially mitigated by a mid-single-digit percentage increase in vehicle sales at the point of purchase.
The analyst from BofA Securities reaffirmed the Buy rating and raised the price objective to $28, based on a 17-times multiple applied to the projected calendar year 2025 earnings per share of $1.65. The positive outlook reflects confidence in Mattel's ability to navigate market challenges and capitalize on operational efficiencies.
Mattel's financial results indicate that the company is making strides in improving its profitability through strategic initiatives. Despite a decrease in sales for its iconic Barbie brand, the company has managed to offset some of the declines with growth in other areas, showcasing its diversified portfolio's strength.
The updated price target suggests that BofA Securities sees potential for Mattel's stock value to grow, backed by solid financial performance and effective management strategies.
In other recent news, Mattel Inc. has exceeded earnings expectations, despite a downward revision in its annual sales outlook. Analysts from Citi and DA Davidson have maintained their Buy ratings on Mattel, with price targets of $26 and $27 respectively. The toy manufacturer's ability to surpass last year's success from the hit Barbie movie has been noted, with Mattel demonstrating resilience and growth.
Mattel has also raised its annual cost savings goal to approximately $75 million, part of a broader strategy to achieve $200 million in cost reductions by 2026. The company's gross margin forecast for the year has been adjusted to reach 50%, an increase from the previously projected range of 48.5% to 49%.
For 2024, Mattel has tempered its net sales expectations to be flat or slightly lower compared to the $5.44 billion reported last year. Despite this, Mattel is maintaining its projected adjusted earnings per share for the year at $1.35 to $1.45.
These are among the recent developments for the company.
InvestingPro Insights
To complement BofA Securities' optimistic outlook on Mattel Inc. (NASDAQ: MAT), InvestingPro data provides additional context to the company's financial health and market position. Mattel's current P/E ratio of 19.17 and adjusted P/E ratio of 18.01 for the last twelve months as of Q2 2024 suggest a reasonable valuation relative to earnings, especially when considering the PEG ratio of 0.45, which indicates the stock may be undervalued relative to its growth prospects.
InvestingPro Tips highlight that Mattel "has a perfect Piotroski Score of 9," signaling strong financial strength and potential for future performance. This aligns with the company's ability to exceed earnings expectations as noted in the article. Additionally, the tip that "management has been aggressively buying back shares" could be seen as a vote of confidence in the company's future, potentially supporting the stock price.
The data shows Mattel's revenue for the last twelve months as of Q2 2024 at $5,428.71 million, with a gross profit margin of 49.56%. This robust margin is consistent with the article's mention of Mattel's better-than-expected gross margin of 53.1% in the third quarter, underscoring the company's ability to maintain profitability despite sales challenges.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Mattel on the platform.
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