JAKKS Pacific Inc. (JAKK), a multi-brand company that designs and markets a broad range of toys and consumer products, is slated to release its second-quarter 2012 results on Tuesday, April 17, before the opening bell. The Zacks Consensus Estimate projects earnings of 12 cents per share for second quarter 2012 on revenues of $137.0 million.
With respect to earnings surprises over the trailing four quarters, JAKKS has missed the Zacks Consensus Estimate in three quarters and outperformed in one quarter. The earnings surprise ranges from negative 14.8% to positive 6.8%, with the average at negative 5.0%. This indicates that the company has missed the Zacks Consensus Estimate by the same magnitude over the last four quarters.
First Quarter Recap
JAKKS reported adjusted loss of 65 cents per share, wider than the Zacks Consensus Estimate of a loss of 61 cents. The quarterly results not only deteriorated from year-ago earnings of 40 cents per share but were also below management’s guidance range of loss of 61 cents to 64 cents.
The lower-than-expected results were due to additional operating expenses associated with the recent acquisition of Moose Mountain, as well as marketing expenses associated with the launch of the Monsuno product line.
The company’s revenue nudged up 1.5% year over year to $73.4 million but gross margin plunged 150 basis points to 32.1%.
Outlook
For 2012, JAKKS forecasts adjusted earnings in the range of $1.01 – $1.07 per share. The company expects total sales in the range of $720–$728 million, implying a growth of 6.2% to 7.4%.
Zacks Consensus
The analysts covered by Zacks expect JAKK to post earnings of 12 cents per share in the second quarter of fiscal 2012, lower than the year-ago earnings of 16 cents. Currently, the Zacks Consensus Estimate ranges between 2 cents and 20 cents a share.
Estimates Revisions Trend
Estimates have not budged in the last 60 days, implying that the analysts are maintaining their outlook post first quarter earnings.
Agreement of Estimate Revisions
In the last 30 and 7 days, none of the 6 analysts covering the stock revised their estimates for the second quarter and fiscal 2012, implying the lack of near-term catalyst to effect the estimates. Moreover, over the past 30 and 7 days, none of the analysts moved the estimates upward or downward for fiscal 2013.
Magnitude of Estimate Revisions
In the last 60 days, estimates for second quarter 2012, fiscal 2012 and 2013 remained unchanged at 12 cents, $1.09 and $1.31, respectively, indicating that the analysts expect the company to report in line.
Our Take
We remain optimistic about its long-term growth potential with product launches, possible acquisitions, resolution of litigation and a strong financial condition. The company anticipates an improved retail atmosphere in 2012. We expect the company to draw considerable attention in 2012 from one overseas property called Monsuno and other initiatives in doll segments. The company also initiated a dividend program in the third quarter of 2011, equating to an annual dividend of 40 cents per share.
However, faltering consumer confidence, wage inflation in China and higher dependence on new products and new licenses make us skeptical on the stock. Moreover, foreign currency headwinds further add to the concern as the majority of the toys in the world are produced in China.
Accordingly, the company has a Zacks #3 Rank (short-term Hold rating) and a long-term Neutral recommendation.
Mattel, one of JAKKS’ primary competitors, is slated to release its second quarter 2012 results on the same day. JAKKS’ other peer Hasbro Inc. (HAS) will report its second quarter 2012 results on July 22, 2012.
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JAKKS PACIFIC (JAKK): Free Stock Analysis Report
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