LeapFrog's Upside Trend Persists - Analyst Blog
06 Novembro 2012 - 3:16PM
Zacks
LeapFrog Enterprises Inc. (LF) reported
earnings of 60 cents per share in the third quarter of 2012, which
breezed past the Zacks Consensus Estimate of 41 cents and the
year-ago quarter earnings of 25 cents per share.
LeapFrog’s net revenue of $193.1 million jumped 28% year over year
and also surpassed the Zacks Consensus Estimate of $174 million
comfortably. Foreign exchange had an unfavorable impact of 1%.
Revenue was mainly driven by a surge in demand for both LeapPad
hardware platform, and content and introduction of new products
like LeapPad2, LeapsterGS and the Touch Magic toy line. Shift in
some sales of the fourth quarter to the third quarter also boosted
sales.
Quarter Highlights
LeapFrog experienced net revenue growth on a worldwide basis. In
the U.S. segment, net revenue leaped 26% to $116 million. The
segment revenue was driven by robust growth in the U.S.
Point-of-sale system and solid sales of LeapPad, LeapPad2 and
content. While in the international segment, net revenue shot up
36% to $34.9 million, driven by double-digit growth in
Point-of-sale system in core markets.
Net revenue from multimedia learning platforms and contents line
soared 48% year over year. LeapPad's cartridges and accessories
line enjoyed strong revenue growth, partially offset by lower
revenue from the gaming platform. In contrast, sales of the
learning toy line remain sluggish as the overall toy industry sales
in the U.S are down by about 6%.
In the quarter under review, gross profit expanded 25% year over
year to $77 million, whereas gross margin contracted 100 basis
points to 40% year-over-year, due to higher inventory allowances,
partially offset by lower trade allowances and discounts, coupled
with higher sales volume. Operating expenses grew 10% on a
year-over-year basis to $40 million as selling, general and
administrative expenses, and research and development costs
increased.
Financial Highlights
At quarter end, total assets were $400.5 million compared with
$302.0 million at the end of the year-earlier quarter.
As of September 30, 2012, shareholders’ equity was $265.7 million
versus $197.8 million as of September 30, 2011.
Outlook
Based on strong third-quarter results, retail point of sale trends,
and inventory position, management raised its outlook for 2012. The
company now expects earnings per share between 75 cents and 81
cents from the previous expectation of 61 cents to 66 cents. Net
sales are estimated to increase 18%–21%, up from the previous
expectation of 13%–15%.
Our Take
We remain upbeat about the company’s performance in the holiday
season with solid retail and marketing plans, good point-of-sale
momentum and an optimistic outlook. The company plans to increase
its advertising expenditure by 20% to 25% to attract customers
during the holiday period. Moreover, with a record of nine
consecutive quarter beats and increased guidance for 2012, we
expect estimates to move up in the coming days. The Zacks Consensus
Estimates for 2012 and 2013 are pegged at 78 cents and 79 cents,
respectively. However, lower consumer spending amid a tepid economy
and stiff competition remain causes of concern.
LeapFrog currently, retains a Zacks #2 Rank, which translates into
a short-term Buy rating. We are maintaining our long-term
Outperform recommendation on the stock.
Mattel Inc. (MAT), one of LeapFrog’s peers,
reported third-quarter 2012 earnings of $1.04 per share outpacing
the Zacks Consensus Estimate of 99 cents as well as the year-ago
quarter level of 86 cents. Solid performance in Other Girls brands
and margin expansion led to the beat.
LEAPFROG ENTRPS (LF): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
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