On Thursday, Goldman Sachs reaffirmed its Buy rating on Mattel Inc . (NASDAQ: NASDAQ:MAT) stock with a steady price target of $22.00. Mattel's third-quarter results for 2024 showed a mix of underperformance and overachievement against market expectations.
The toy manufacturer reported revenue of $1.844 billion, a 4% decline year-over-year, falling short of the consensus forecast of $1.860 billion. However, Mattel surpassed expectations with its Adjusted EBITDA at $584 million, compared to the predicted $521 million, and an Adjusted EPS of $1.14, outperforming the consensus of $0.94.
In response to the quarterly outcomes, Mattel has updated its full-year 2024 guidance. The company has slightly lowered its revenue projections but has raised its adjusted gross margin expectations by 125 basis points at the midpoint. Despite the adjustment in revenue forecasts, Mattel is maintaining its guidance for Adjusted EBITDA and Adjusted EPS for the year.
The analyst from Goldman Sachs highlighted that despite the mixed third-quarter results, Mattel remains their top pick within the toy industry, especially in the face of ongoing macroeconomic volatility. The company's focus on cost management, improved balance sheet flexibility, and the ability to return capital to shareholders were cited as key reasons for the positive outlook.
Goldman Sachs sees a 24% upside to its $22 price target for Mattel, which is based on 12.0 times the estimated earnings per share for 2026. The firm's continued support for the stock reflects confidence in Mattel's execution strategy and its position in the market.
In other recent news, Mattel Inc. has shown resilience despite a challenging market environment. The company reported an adjusted earnings per share (EPS) of $1.14, surpassing analysts' estimates. Although the company experienced a 3% decline in overall gross billings, it managed to offset some of these declines with growth in other areas.
Mattel also raised its annual cost savings goal to approximately $75 million, as 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.
Analysts from BofA Securities, Citi, and DA Davidson have maintained their Buy ratings on Mattel, with price targets of $28, $26, and $27 respectively. These recent developments reflect the company's ability to navigate market challenges and capitalize on operational efficiencies.
InvestingPro Insights
Mattel's financial health and market position align with Goldman Sachs' optimistic outlook. According to InvestingPro data, Mattel's P/E ratio stands at 18.01, suggesting a relatively modest valuation compared to its earnings. This is further supported by a low PEG ratio of 0.45, indicating that 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 stability. This aligns with Goldman Sachs' positive view on the company's balance sheet flexibility. Additionally, management's aggressive share buybacks and the expectation of net income growth this year reinforce the company's confidence in its financial trajectory.
The company's EBITDA growth of 29.05% over the last twelve months demonstrates Mattel's ability to improve profitability, which is consistent with the analyst's emphasis on cost management. While Mattel doesn't pay a dividend, its focus on share buybacks suggests a commitment to returning value to shareholders through alternative means.
For investors seeking a deeper understanding of Mattel's potential, InvestingPro offers 5 additional tips, providing a more comprehensive analysis of the company's prospects.
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