JAKKS Pacific Inc. (JAKK) has reported second quarter 2011 earnings of 16 cents per share, which was a penny ahead of the Zacks Consensus Estimate. The quarter’s results showed an improvement from 11 cents recorded in the prior-year quarter.
The company reported a 7.0% year-over-year growth in revenues to generate $131.9 million. The quarterly revenue surpassed the Zacks Consensus Estimate of $129.0 million.
Selling, general and administrative expenses slipped 1.3% year over year to $30.6 million mainly due to lower incentive compensation, partially offset by increased legal and other professional fees and expenses. Gross margin dropped 70 basis points to 34.2% due to persistent cost pressures.
Financial Position
At quarter end, JAKKS had cash and cash equivalents and marketable securities of $247.1 million versus $278.5 million at December 31, 2010. The company’s long-term debt was $90.8 million versus $89.5 million at December 31, 2010.
Guidance
For 2011, JAKKS expects adjusted earnings between $1.32 and $1.35 per share, up 4% to 6% year over year. The company’s sales guidance is $770–$775 million, implying a growth of 3% to 4%.
The company expects growth across all units, including role play toys, action figures, Halloween costumes, electronics, kids’ furniture and dolls. Management also appears keen on acquisitions and is looking for possible targets. However, JAKKS expects cost inflation to continue in the remainder of 2011.
JAKKS Pacific expects to have stable margins for the remainder of the year driven by an improved supply chain and introduction of higher-margin products.
Our Take
We remain optimistic on JAKKS’ long-term growth potential with product launches, and a strong financial condition. The company started shipping some of its new toys, electronics and Halloween costumes for the second half of the year. However, bulk of the shipments will occur in the third and fourth quarters of 2011 which include the holiday season. Additionally, JAKKS Pacific joined Nickelodeon, the leading children’s entertainment network, for the worldwide broadcast rights to Monsuno.
Hence, we expect the estimates to rise in the future. However, higher input and labor costs remain causes for concern. JAKKS Pacific currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
One of JAKKS’ primary competitors, Mattel Inc. (MAT) reported second quarter 2011 results last week. Mattel’s earnings per share topped our estimate by 7 cents.
JAKKS PACIFIC (JAKK): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment