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MKM Partners Upgrades Mattel to a ‘Buy’

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Dec. 4 2020, Updated 10:53 a.m. ET

Price movement

Mattel (MAT) has a market cap of $10.5 billion. It rose 0.80% to close at $30.30 per share on October 10, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -1.5%, -4.5%, and 15.7%, respectively, on the same day.

MAT is trading 2.8% below its 20-day moving average, 6.4% below its 50-day moving average, and 2.0% below its 200-day moving average.

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Related ETF and peers

The ALPS Sector Dividend Dogs ETF (SDOG) invests 2.2% of its holdings in Mattel. The ETF tracks an equal-weighted index of the five highest-yielding S&P 500 securities in each sector. The YTD price movement of SDOG was 19.2% on October 10.

The market caps of Mattel’s competitors are as follows:

  • Walt Disney Company (DIS): $149.2 billion
  • Hasbro (HAS): $10.2 billion

Mattel’s rating

On October 10, 2016, MKM Partners upgraded Mattel’s rating to a “buy” from “neutral” and set the stock’s price target at $36.00 per share.

TheStreet reported, “Revenue stabilization has transitioned to growth, particularly within Mattel’s Barbie and Fisher Price brands, which together generate about 50% of the company’s gross revenue, according to MKM.”

TheStreet added, “New product line initiatives should help drive revenue acceleration in 2017 and a return to 15% operating margin for the first time in four years.”

Performance of Mattel in 2Q16

Mattel (MAT) reported 2Q16 net sales of $957.3 million, a fall of 3.1% from its net sales of $988.2 million in 2Q15. Gross sales of the Mattel Girls & Boys and American Girl brands fell 8.0% and 19.1%, respectively.

Gross sales of the Fisher-Price and Construction and Arts & Crafts brands rose 2.8% and 11.6%, respectively, between 2Q15–2Q16. The company’s gross profit margin fell 5.4%.

Mattel’s net income and EPS (earnings per share) fell to -$19.1 million and -$0.06, respectively, in 2Q16, compared to -$11.4 million and -$0.03, respectively, in 2Q15. It reported adjusted EPS of -$0.02 in 2Q16, compared to $0.01 in 2Q15.

Mattel’s (MAT) cash and cash equivalents and inventories rose 5.8% and 4.5%, respectively, between 2Q15 and 2Q16. Its current ratio and long-term debt-to-equity ratio fell to 1.7x and 0.77x, respectively, in 2Q16, compared to 2.6x and 0.81x, respectively, in 2Q15.

Next, we’ll discuss Hormel Foods (HRL).

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