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Not At All Fun Nor Games: Mattel (MAT) Swing And A Miss

|Includes:Mattel, Inc. (MAT)

Matell (NASDAQ:MAT) announced this mornig that they missed pretty badly on both revenue and profit. In short:

North American Region gross sales down 8% and International Region gross sales down 9%;
...
Gross margin decreased 490 basis points of net sales
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SG&A increased 340 basis points of net sales
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Operating income of $1.0 million compared to operating income of $94.8 million in the second quarter of 2013
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Earnings per share of $0.08 [...] vs. prior year earnings per share of $0.21.

Mr. Market felt like his Hot Wheels Turbo Hauler Truck got creamed by a Fisher-Price Lil Zoomers Rockin' Roll Truck. Must be time to buy as we inch back towards the 52 week low.

The Earnings Call Transcript has some nuggets but ultimately this will take many quarters to resolve. The biggest challenge is digesting the acquisition of MEGA Brands.

As a very long term investor, my obvious bet here is that the dividend will hold solid. Stats:

  • Matell is a David Fish Dividend Challenger and has paid increasing dividends for the last five years. The 1, 3, 5, and 10 year Dividend Growth Rates are, respectively, 16.1%, 20.2%, 13.9%, and 13.7%.
  • The Chowder Rule is 17.8%.
  • Parsimony Investment Research rates Matell with a composite score of 74 (almost in top quartile) and a Risk/Reward ranking of 90 (high). Very poor ranking (30) on Dividend Sustainability.
  • Although dated, the April 11th Valuentum Buying Index was 3 out of 10 (poor) but with high marks for Dividend Safety / Cushion and Dividend Growth Potential.

I've been acquiring Matell since mid February (first purchase on 2/19 just $0.16 above 52 week low) and it has certainly been a bit of a roller coaster ride.

Today I added my fourth and final lot at $36.20 and have a full position with an average cost basis of $36.48.

It's time for Barbie and the American Girl chicks to kick it into gear. I'll sit back and watch for awhile.

Disclosure: The author is long MAT.

Stocks: MAT