Stock Story -
Toy manufacturing and entertainment company (NASDAQ:MAT) missed analysts' expectations in Q2 CY2024, with revenue flat year on year at $1.08 billion. It made a GAAP profit of $0.17 per share, improving from its profit of $0.08 per share in the same quarter last year.
Is now the time to buy Mattel? Find out by reading the original article on StockStory, it's free.
Mattel (NASDAQ:MAT) Q2 CY2024 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $1.10 billion (1.8% miss)
- EPS: $0.17 vs analyst estimates of $0.16 (7.9% beat)
- Reconfirmed full-year 2024 revenue and earnings guidance
- Gross Margin (GAAP): 49.2%, up from 44.9% in the same quarter last year
- Free Cash Flow was -$287.9 million, down from $5 million in the previous quarter
- Market Capitalization: $6.43 billion
Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ:MAT) is a global children's entertainment company specializing in the design and production of consumer products.
Toys and ElectronicsThe toys and electronics industry presents both opportunities and challenges for investors. Established companies often enjoy strong brand recognition and customer loyalty while smaller players can carve out a niche if they develop a viral, hit new product. The downside, however, is that success can be short-lived because the industry is very competitive: the barriers to entry for developing a new toy are low, which can lead to pricing pressures and reduced profit margins, and the rapid pace of technological advancements necessitates continuous product updates, increasing research and development costs, and shortening product life cycles for electronics companies. Furthermore, these players must navigate various regulatory requirements, especially regarding product safety, which can pose operational challenges and potential legal risks.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Unfortunately, Mattel's 3.8% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Mattel's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.5% annually.
This quarter, Mattel missed Wall Street's estimates and reported a rather uninspiring 0.7% year-on-year revenue decline, generating $1.08 billion of revenue. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
Cash Is King Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Mattel has shown decent cash profitability, giving it some flexibility to reinvest. The company's free cash flow margin averaged 11.3% over the last two years, slightly better than the broader consumer discretionary sector.
Mattel burned through $287.9 million of cash in Q2, equivalent to a negative 26.7% margin. The company's cash burn increased meaningfully year on year and is a deviation from its longer-term margin, raising some eyebrows.
Key Takeaways from Mattel's Q2 Results It was good to see Mattel beat analysts' EPS expectations this quarter and reconfirm its full-year revenue guidance. Overall, this was a decent quarter. The stock traded up 1.1% to $17.45 immediately following the results.
