Mattel (MAT) Outpaces Industry in the Past 6 Months: Here's Why
Despite the coronavirus pandemic, Mattel, Inc. MAT has performed well and emerged as an attractive investment option. This is quite evident from the stock’s price performance in the past six months. Shares of the company have gained 53.4% compared with the industry’s rally of 17.2%.
We believe there is still momentum left in this Zacks Rank #1 (Strong Buy) stock. The company’s estimated 2021 and 2022 earnings growth rate are pegged at 66.7% and 26.9%, respectively. Moreover, the Zacks Consensus Estimate for 2021 and 2022 earnings have witnessed upward estimate revisions of 20% and 18.6% to 90 cents and $1.15, respectively, in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Year to date, stocks such as Hasbro, Inc. HAS, Take-Two Interactive Software, Inc. TTWO and Activision Blizzard, Inc. ATVI have gained 13.5%, 3.8% and 23.5%, respectively. Let’s delve deeper and analyze the reasons that kept Mattel ahead of its peers.
Growth Drivers
The company continues to benefit from strong products line-up. Owing to its popularity among young boys and girls, the company’s premier brand, Hot Wheels, has been the category leader in multiple product segments for several years. The company is also gaining from robust North America sales, which increased 66% year over year on a constant currency during first-quarter 2021.
In 2020, worldwide gross sales at the Hot Wheels brand increased 3% on a reported basis and 5% at constant currency (cc). It also marked the seventh consecutive year of POS growth in the United States and globally. Notably, during first-quarter 2021, the company witnessed double-digit growth in all three of its power brands. Worldwide gross sales at the Hot Wheels brand increased 16%, both on a reported basis and a cc basis. The company is optimistic regarding the performance of its core brands throughout 2021.
Meanwhile, Barbie brand continues to impress investors with solid performance. In the first quarter, Barbie brand’s worldwide gross billings witnessed an improvement of 87% on a reported basis and 86% on a cc basis. Notably, Barbie point of sales increased 66%.
The company is focused on strong cost and productivity initiatives to support growth, operate more efficiently and rebuild margins. During fourth-quarter 2020, it initiated a new multi-year program — Optimizing for Growth. Notably, this program along with the integration of Capital Light Program is likely to deliver an additional $250 million of savings by 2023. Also, the company is raising the estimated range of cost savings for 2021 from $75 million to a range of $80 million to $90 million.
Moreover, cost-saving initiatives have been helping the company in driving margin growth. In first, second, third, fourth-quarter of 2020 and first-quarter of 2021 adjusted gross margin expanded 450, 410, 410, 250 and 350 basis points (year over year) to 43.5%, 44%, 51%, 51.4% and 47%, respectively. It is the 11th consecutive quarter of improvement on a year-over-year basis, attributable to the savings from the structural simplification and capital light program.
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Mattel, Inc. (MAT) : Free Stock Analysis Report
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