Disappointing 4Q for JAKKS Pacific - Analyst Blog
23 Fevereiro 2012 - 8:00AM
Zacks
Toy maker JAKKS Pacific
Inc’s (JAKK) adjusted loss of 72 cents
per share in the fourth quarter of 2011, was considerably wider
than the Zacks Consensus Estimate of a loss of 61 cents a
share. The quarterly result also deteriorated considerably
from the year-ago quarter earnings of 13 cents per share and was
well below management’s earnings guidance of 37 cents to 40
cents.
On a GAAP basis, reported loss of
77 cents per share was well below the year-ago quarter earnings of
30 cents. The lower-than-expected results were due to negative
top-line growth in the crucial holiday season.
The company’s revenue tumbled 28.7%
year over year to $141.1 million in the fourth quarter due to weak
retail sales environment amid the crucial holiday season. The
company’s results were also unimpressive as it had to bear the
brunt of increased markdown allowances and royalty expenses related
to license guarantee shortfalls.
Selling, general and administrative
expenses rose 16.5% year over year to $32.2 million in the fourth
quarter and crept up 3.9% to $128.5 million in 2011. Owing to lower
demand, the company offered higher discounts to attract customers,
which in turn hurt margins. At the end of the fourth quarter, loss
from operations was $36.0 million as against an operating income of
$11.0 million in the year-ago quarter. In 2011, operating income
was $1.3 million versus $50.2 million in 2010.
In full year 2011, the company
reported adjusted earnings of $10.9 million or 41 cents per share
versus $38.2 million or $1.27 per share in the prior year. Total
revenue fell 9.3% to $784.5 million.
Financial
Position
At the end of 2011, JAKKS had cash
and cash equivalents and marketable securities of $257.3 million
versus $278.3 million at December 31, 2010. The company’s long-term
debt was $92.2 million versus $89.5 million at December 31,
2010.
The company also announced a
quarterly cash dividend of 10 cents per share, payable on April 2,
2012 to the shareholders of record as of March 2012.
Guidance
For 2012, JAKKS forecasts adjusted
earnings in the range of $1.01 to $1.07 per share. The company
expects sales in the range of $720–$728 million, implying a growth
of 6.2% to 7.4%.
In the first quarter of 2012, the
company anticipates net sales in the range of $63 to $70 million,
with loss per share in the range of 61 cents to 64 cents.
The company foresees a better
retail sales environment in 2012 and remains upbeat regarding its
strong product line up and growth opportunities across all units,
including role play toys, action figures, Halloween costumes,
electronics, kids’ furniture and dolls. Management also remains
optimistic regarding the overseas property Monsuno, an animated
Japanese television series, likely to come on air soon and the toy
line launch scheduled in March. Additionally, the company is also
looking forward to the recent deal with Warner Brothers Consumer
Products.
Our Take
We remain optimistic on JAKKS’
long-term growth potential with product launches and strong
financial condition. However, disappointing fourth quarter results
and the expectation of a loss in the upcoming first quarter 2012
remain concerns. Moreover, higher input and labor costs are
headwinds. Hence, we expect the estimates to move down in the
future.
JAKKS Pacific currently retains a
Zacks #5 Rank, which translates into a short-term Strong Sell
rating. We are also maintaining our long-term Underperform
recommendation on the stock.
One of JAKKS’ primary competitors,
Mattel Inc. (MAT) reported fourth quarter earnings
of $1.07 per share, which was ahead of the Zacks Consensus
Estimate. Another peer company, Hasbro Inc. (HAS)
has reported fourth quarter 2011 earnings per share of $1.06, which
was in line with the Zacks Consensus Estimate.
HASBRO INC (HAS): Free Stock Analysis Report
JAKKS PACIFIC (JAKK): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
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