Toy stocks had been in the news in the last few months, but it wasn’t always good news. Weaker holiday season sales, the lack of any mega-popular toy for the Christmas season, and growing costs, along with product recalls in a generally softening economy made for some recent troubles. Leading toy maker Mattel, Inc.(NYSE: MAT), with a market cap of $7.9 billion, maker of Barbie dolls, Fisher-Price toys and a slew of other well known toy names such as Hot Wheels, Matchbox, Tyco, Dora the Explorer and many more, had problems with toxic toys being made in China for the company. Specifically, millions of toys were recalled due to toxic lead paint. Yet despite this setback, it reported fourth quarter profits up 15%. Their net income was 89 cents per share, or $328 million, up from 75 cents a share and $286 million. The company showed an increase in sales of 4 percent, up from $2.11 billion to $2.19 billion. Though its growth is expected to be modest near-term, it is positioned, as are all the leading toymakers, to do well even in the face of lagging consumer spending.
Hasbro (NYSE: HAS), about half the size of Mattel, is currently doing even better. It saw its fourth quarter profits shoot up 24%, on rising sales of 16 percent. Its revenue for the full year 2007 was up to $3.84 billion, from $3.15 in 2006. The fourth quarter earnings were 84 cents per share, up from 62 cents the same quarter a year earlier. For the full year, their EPS was $2.05 per share, up from $1.21 in 2006. Hasbro has strong franchises with Transformers and Star Wars toys. Additionally, they had no exposure to the widespread toxic lead paint that Mattel had. Despite similar modest growth projections as for Mattel, long term growth prospects for Hasbro, as do the prospects for Mattel look decidedly robust long term, since they have been streamlining operations for the past few years.
The hottest franchise of any specific toy right now belongs to Jacks Pacific (NASDAQ: JAKK), which has Hannah Montana dolls, from the wildly popular hit tv and stage show. Jakks, which also makes a wide range of other toys including pet toys, is much smaller than either Hasbro or Mattel, with its $700 million market cap, had EPS of $2.47 for trailing twelve months’ earnings, and with the sales weaknesses for the sector already factored in, 2008 estimates are for around $2.00.
These stocks appeared to bottom in January, and with the toughest sledding behind them, have begun to move up. The trio has been steadily rising and now trade in their mid-range of the last twelve month share prices.
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