Shares of toy maker Mattel, Inc. (ticker: MAT) are looking to rebound after the company’s shares were hammered following a disasterous first-quarter earnings report last week.
MAT stock fell more than 13 percent Friday after the company reported first-quarter revenue and earnings that fell well short of market expectations, and Wall Street analysts are growing increasingly skeptical of the company’s long-term outlook.
Mattel reported an earnings per share loss of 32 cents on revenue of $736 million for the first quarter. Both numbers were significantly lower than consensus analyst expectations of a loss of 17 cents per share on $801 million in revenue.
CEO Margo Georgiadis says Mattel has now worked through much of the fourth-quarter overhang that weighed on earnings in the first quarter of 2017.
“Our Q1 results were below our expectations due to the retail inventory overhang coming out of the holiday period, but we remain encouraged by strong performance at retail for our key core brands, including Barbie, Hot Wheels and FisherPrice, as well as sustained momentum in high-growth markets like China,” Georgiadis says.
Several analysts weren’t buying Georgiadis’s positive spin on the lackluster quarter.
One of Mattel’s most attractive qualities to long-term investors is its 6.8 percent dividend yield, but Stifel analyst Drew Crum says the company’s slow start to 2017 puts Mattel’s dividend at risk.
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“Our confidence around sustaining the dividend continues to wane, which could serve as an overhang for the shares, at least near term,” Crum says.
MKM Partners analyst Eric Handler has lowered his firm’s price target for Mattel from $27 to $24 and says the toymaker has started out the year in a hole that may be too deep to dig out of in 2017.
“Given the missteps seen in four of the last five years, we are skeptical about the current turnaround,” Handler says.
Goldman Sachs and SunTrust also lowered price targets for Mattel to $25 following the earnings report.
Despite the mostly bearish commentary on Mattel, at least one analyst remains bullish.
“In the toy industry, the first quarter is often called the fifth quarter because it is where problems from the fourth quarter are often cleaned up — this is precisely what we see happening with Mattel’s business,” BMO Capital analyst Gerrick Johnson says.
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Johnson is optimistic about Mattel’s prospects under Georgiadis’ leadership and believes patient investors will be rewarded in the long term.
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Horrendous Quarter Puts Dividend at Risk for Mattel, Inc. (MAT) originally appeared on usnews.com
