- Mattel stock was one of the big gainers on Wednesday.
- The stock price was up 15% on the day and has risen 17% YTD.
- The outlook for 2025 calls for slow and steady growth.
The venerable toy maker came to life in Q4
When you think of Mattel (NASDAQ:), you think of Barbie, Hot Wheels, and American Girl dolls, not necessarily the performance of its stock .
But on Wednesday, the stock price was the story as the toy maker’s stock was one of the top gainers on the market, rising more than 15% to almost $21 per share.
The share price for Mattel stock is not only at a 52-week high, but it is at the highest level it has been since October of 2023.
Here’s why Mattel stock was surging.
Solid Fourth Quarter Earnings Growth
Investors were pleased with Mattel’s fourth quarter earnings report, released on Tuesday after the closing bell.
However, the numbers were solid, but not spectacular. Revenue was only up 2% to $1.65 billion, but it beat estimates of $1.64 billion.
Net income was down 4% in the quarter to $141 million. Earnings were basically flat at 42 cents per share. However, on an adjusted basis, when you exclude severance and restructuring expenses and changes to deferred tax assets, earnings were up significantly.
The adjusted earnings were 35 cents per share, up from 29 cents per share the same quarter a year ago. Adjusted earnings were far better than the 20 cents per share that analysts had expected.
In North America, net sales were up 1% year over year due to growth in vehicles, primarily Hot Wheels, along with action figures, building sets, and games. The gains were offset by declines in the infant, toddler, and preschool segments, as well as dolls, primarily Barbie.
Internationally, net sales increased 3% led by growth in vehicles, primarily Hot Wheels, along with the infant, toddler, and preschool segments. The gains were partly offset by declines in dolls, primarily Barbie.
For the full year, net sales were down 1% to $5.38 billion but net income was up some 153% to $542 million, or $1.59 per share. This was due to keeping expenses in check, lower provision from income taxes, and a one-time spike in non-operating income. Mattel has benefitted from its Optimizing for Profitable Growth expense reduction program.
Competing Against Barbie Movie
It should be noted, however, that these sales numbers were compared to 2023, when the blockbuster Barbie movie came out, which escalated exposure and sales. So, the increases, while small, are viewed as more impressive than they otherwise would have been.
“These results are particularly noteworthy considering the comparison against the success of the Barbie movie which contributed approximately $100,000,000 of operating income in 2023. Execution on our toy strategy was strong, and we grew global market share in key categories of dolls, vehicles and games. We also made meaningful progress on our entertainment strategy across film, television, digital, consumer products and live experiences,” Ynon Kreis, chairman and CEO of Mattel, said on the earnings call.
The CEO also cited the success of the Optimizing for Profitable Growth program on the call, saying it is tracking ahead of schedule. Already, the company has saved $83 million of its $200 million target by the end of 2026.
The cost savings have boosted Mattel’s cash position by about 10% to $1.4 billion, that’s after repurchasing $400 million in shares. In 2025, Mattel plans to buy back another $600 million shares, which should help its share price.
Outlook for 2025
Mattel issued guidance for 2025, and it projects more slow, steady growth. Mattel is calling for net sales to increase 2% to 3% in 2025. Operating income is also anticipated to rise, as Mattel targets a range of $740 million to $765 million. That would be up from $738 million in 2024.
The adjusted EPS is $1.66 to $1.72 per share, up from $1.62 adjusted EPS in 2024, while the gross margin is anticipated to remain at 50.9%. Lastly, free cash flow is estimated to be roughly the same at $600 million.
Mattel stock is up 17% year-to-date, with most of it coming Wednesday. Over the past 12 months it has gained 9%. Analysts expect about an 11% upside over the next 12 months with a price target of $23 per share.
But it has not been the best long-term performer with a five-year annualized return of 7.4% and a 10-year annualized return of -3% per year.
The stock is pretty cheap with a P/E of 11 and it seems headed in the right direction. But I would expect slow and steady, not spectacular performance.
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