Mattel (MAT) Q2 Earnings: Is it Likely to Disappoint?

Leading toy-maker, Mattel, Inc. MAT, is scheduled to report second-quarter 2017 numbers on Jul 27, after market close.

Last quarter, Mattel’s loss was wider than the Zacks Consensus Estimate by 88.24%. In fact, the trailing four-quarter average earnings surprise is a negative 12.08%.

Let’s see how things are shaping up for this announcement.

Mattel, Inc. Price and EPS Surprise

 

Mattel, Inc. Price and EPS Surprise | Mattel, Inc. Quote

Factors Likely to Influence Q2 Results

Mattel’s increased focus on improving its point of sale through launch of new products, along with strategic initiatives like entering new categories and strengthening the Girls’ portfolio are expected to bolster second-quarter results. Also, solid performance in some international markets, particularly China, might boost sales.

Notably, the company’s core brands like Hot Wheels, Fisher-Price and MEGA Brands have been doing well. We anticipate this trend to continue in the to-be-reported quarter as well.

Efforts to achieve cumulative cost savings and enhanced margins should further boost the quarter’s performance. In fact, as Mattel has worked through most of its inventory issues, it expects to start witnessing the benefits of scale and its cost savings programs.

However, challenging macroeconomic environment and sluggish performance at Mattel Girls & Boys Brands might limit revenue growth in the second quarter. Although the company is undertaking various efforts to bring back its flagship brand – Barbie – to its former position, it remains to be seen if desired results are achieved in this quarter, after a dismal first-quarter 2017.

Additionally, the U.S. toy category slowdown, unfavorable foreign exchange translation, along with costs related to sales-boosting initiatives might further hamper the quarter’s results.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Mattel this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below:

Zacks ESP: Mattel has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 8 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Mattel has a Zacks Rank #5 (Strong Sell).

As it is we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Penn National Gaming, Inc. PENN has an Earnings ESP of +20.83% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Live Nation Entertainment, Inc. LYV has an Earnings ESP of +17.65% and a Zacks Rank #3.

Comcast Corporation CMCSA has an Earnings ESP of +2.08% and a Zacks Rank #3.

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