Mattel (MAT 15.33%) stock made like a Jack-in-the-box this morning, popping up 12.5% through 10:55 a.m. ET after reporting a big fourth-quarter earnings beat after the market closed Tuesday.
For the period, analysts had forecast Mattel would earn only $0.20 per share, adjusted for one-time items, on sales of $1.63 billion. Instead, Mattel reported adjusted earnings of $0.35 per share on sales of $1.65 billion.
Mattel Q4 earnings
Mattel’s sales grew 2% year over year, and the gross profit margin it earned on those sales expanded by 190 basis points to 50.7%. On the bottom line, Mattel’s earnings as calculated according to generally accepted accounting principles (GAAP) exceeded its adjusted earnings, coming in at $0.42 per share — exactly equal to 2023’s Q4 GAAP earnings.
For the full year, Mattel’s sales declined by 1% to $5.4 billion, but it improved its gross margin by 330 basis points to 50.8%. The biggest improvement was on Mattel’s bottom line, where GAAP earnings per share were $1.58, much improved over the $0.60 per share Mattel earned in 2023.
Is Mattel stock a buy?
CEO Ynon Kreiz called 2024 a “year of strong operational excellence for Mattel,” and predicted even bigger things for 2025. Turning to guidance, Mattel predicted that it would grow its sales by 2% to 3% while maintaining its profit margins at levels comparable to 2024. Management didn’t provide a forecast for GAAP earnings, but said its adjusted earnings (which remember, were below GAAP earnings in Q4) will grow to between $1.66 per share and $1.72 per share.
Still, that would only be an earnings growth rate of about 4% — better than its forecast sales growth, but far from a barn-burning pace. Even at a seemingly cheap P/E ratio of just 11.5, I’m not convinced Mattel stock is a great buy. The company pays no dividend, is growing slowly, and its net debt load of $1.9 billion is nearly one-third of its market cap.
Call me cheap if you like, but I suspect investors can find better bargains out there than Mattel stock.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
