Mattel, Inc. (NASDAQ:MAT) just released its third-quarter report and things are looking bullish. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 12% higher than the analysts had forecast, at US$1.6b, while EPS were US$0.91 beating analyst models by 152%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, Mattel's 13 analysts are now forecasting revenues of US$4.67b in 2021. This would be a modest 5.3% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Mattel forecast to report a statutory profit of US$0.50 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.57b and earnings per share (EPS) of US$0.41 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a very substantial lift in earnings per share in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 12% to US$15.17per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Mattel, with the most bullish analyst valuing it at US$20.00 and the most bearish at US$12.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that Mattel is forecast to grow faster in the future than it has in the past, with revenues expected to grow 5.3%. If achieved, this would be a much better result than the 6.4% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 15% next year. So although Mattel's revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Mattel's earnings potential next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Mattel going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Mattel that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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