We recently upgraded our rating on Malibu, California-based JAKKS Pacific Inc. (JAKK), from Underperform to Neutral. The rating was upgraded on a host of factors including better-than-expected first quarter results, continued margin expansion, strong product line-up and healthy financials.
JAKKS Pacific reported first quarter 2011 loss of 39 cents per share, a penny ahead of the Zacks Consensus Estimate. The result compared unfavorably with 37 cents loss per share in the prior-year quarter. The company reported a 6.5% year-over-year decrease in revenues to $72.3 million. The quarter’s revenue, however, surpassed the Zacks Consensus Estimate of $67.0 million.
The company remains committed to the execution of its restructuring plan and cost saving initiatives, which are expected to improve profitability for 2011 and beyond. Gross margin in the first quarter expanded 100 bps to 33.6%, despite persistent cost pressure and a shift in product mix. Management expects to achieve margin expansion for the full year, as a result of its efficient supply chain management.
Many of the company’s product launches in 2011 look much better than its products of previous years. Management remains optimistic about the Disney Princess and Fairy product lines, and sees substantial momentum for Phineas and Ferb, Club Penguin, and Toy Story products. We expect booming Halloween business owing to an expanded product line. 2011 seems more lucrative in terms of property release. The relaunch of Pok
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