Hasbro (NYSE: HAS) management recently spoke to analysts at its Investor Day conference. Here's the transcript. We all know the deal about these conferences: companies want to put their best foot forward and convince Wall Street that, if things are going good they are about to get even better, or, if things are going bad they won't be as bad as people thought and they will be improving either soon or on a long-term basis. You can bet that it was the latter tone taken by Team Hasbro at the event. In fact, CEO Brian Goldner said something which I thought was quite amazing: did you know that there actually will be a Christmas this year?
Frankly, I had my doubts. Of course, even though there will be a Christmas, and even though Santa will be delivering a lot of toys to kids this holiday season, it's not going to be a pleasant one for toy manufacturers. We're in a bad recession, folks, which is about to wreak psychological havoc on even the strongest consumer mind. Hasbro wants investors to know that parents will buy the stuff on their children's lists. Hasbro is further betting that the company's products will be on a lot of those lists.
The brand equity inherent in its portfolio was mentioned as a particular strength, one that will help keep margins strong and defend the company against competition not only from the likes of Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK) but also from companies that put out more generic playthings. Management also mentioned that Hasbro is in a position of financial strength because of its cash flow, and that it remains confident that revenue expansion can go beyond increases in costs and expenses.
This post is part of a feature on companies and products that our bloggers think are in need of a makeover.See all 26.
Founded in 1945 in a garage workshop in southern California, Mattel Inc. (NYSE: MAT) is now the world's biggest toy maker, with a market cap of about $5.2 billion. Number two Hasbro Inc. (NYSE: HAS) has a market cap of about $4.2 billion. Mattel produces from everything Barbie and American Girl, to Hot Wheels, Fisher Price toys, Scrabble, and the Magic 8 Ball, as well as tie-ins with Pixar, the Dark Knight, Harry Potter, and Nickelodeon. However, in 2002 Mattel shut its last factory in the United States, and since then most of its products have been produced in China.
That decision came back to bite Mattel when, beginning in the summer of 2007, it was forced to issue a series of recalls of Chinese-made toys that contained lead paint. The company is still reeling from that PR disaster, which for some reason included an apology from Mattel to the Chinese people. The situation prompted BloggingStocks contributor Tom Barlow a year ago to suggest (tongue in cheek) that Mattel merge with Waste Management Inc. (NYSE: WMI) so that toxic toys could go directly where they belonged, bypassing the middleman (i.e., the children). That would be one way to make over the company, I guess.
Today was another strong day in the market, which may be mostly credited to Ben Bernanke giving a carte blanche for another economic stimulus package in his testimony this morning. We saw a rise in California home buying, but that was credited to foreclosure purchases at far lower prices.
Below are today's unofficial closing bell levels: DJIA 9,265.43 +413.21 +4.67% S&P500 985.38 +44.83 +4.77% NASDAQ 1,770.03 +58.74 +3.43% 10YR T-Bond 3.886% (-0.052%) Top ANALYST UPGRADES 52-Week Lows
Cisco Systems Inc. (NASDAQ: CSCO) traded higher by about 2% in pre-market after its rating was raised to Outperform from Market Perform at Morgan Keegan. The firm believes orders are holding up better than many suspect. Another reason for the upgrade was forward valuation levels. Shares closed up almost 6% at $18.96 today.
Exxon Mobil Corp. (NYSE: XOM) traded up 10% today to close at $74.99 as part of a broad oil-sector upgrade at Oppenheimer after recent weakness, and as oil prices recovered throughout the day.
Hasbro (NYSE: HAS), a toy maker which competes with Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK), reported earnings for the third quarter on Monday. The top line increased 6% to $1.2 billion. The bottom line came in at $0.89 per diluted share. If you adjust the earnings reported in the previous year's quarter for a tax benefit, then the growth rate for the current quarter in terms of per-share profit becomes a very decent 14%.
According to this source, Hasbro beat analyst expectations by three pennies. That's a lot better than the usual penny. In addition, management came ahead on the revenue front as well. But did the stock rally on this news? No, it didn't. As of this writing, Hasbro's shares are trading down 7%. I'm surprised to some extent. I at least would have figured a flat performance for the stock. Hasbro is a big name when it comes to toys, and it sells merchandise based on big brands such as Star Wars and Transformers. We are now in the Christmas-shopping season; it's Hasbro's time of year. Thing is, though, Wall Street is worried. It doesn't matter that the market is up as I compose this piece (by the time I submit it, the major indexes could be easily be down 300 points for who knows what). And Hasbro's stock is going to suffer right along with the market. Not only that, but the stock will probably be pressured just because no one knows exactly how much toy buying will go on.
Still, Hasbro's stock was strong earlier in the year, it pays a dividend, and the company was in the market buying back some of its shares during the quarter. Long-term investors I'm sure are willing to snap up some Hasbro. Like I say, it has some powerful properties to sell (although I do wonder how its Star Wars: The Clone Wars product line will do this Christmas since the movie didn't perform so well). However, it might be prudent to wait for a higher yield in this market. The company did well in Q3, but the fourth quarter is not going to be easy for any business.
Disclosure: I don't own any company mentioned; positions can change at any time.
U.S. stock futures jumped higher Monday morning as investors gain more confidence in the different government actions taken to stabilize financial markets. Global shares advanced overnight following measures taken worldwide. Indeed, the three-month U.S. dollar LIBOR, a measure of the rate at which banks lend to each other, dropped to 4.06% from 4.42%.
Also, investors will be keeping an eye on Federal Reserve Chairman Ben Bernanke testimony before the House Budget Committee on the economic outlook and financial markets at 10:00 am EST, same time as the release of the September leading indicators.
As OPEC prepares for a production cut and oil rose to above $74 per barrel, earnings season on Wall Street continues in full swing this week:
Mattel Inc. (NYSE: MAT) reported third-quarter results this morning. Mattel's income rose, but not enough and it missed expectations.
Hasbro (NYSE: HAS) reported a 14% drop in third-quarter profit, but it beat expectations.
Halliburton (NYSE: HAL) swung to a loss in the third quarter, but managed to beat earnings expectations by a penny excluding charges. Revenue in the quarter rose 24%.
SanDisk (NASDAQ: SNDK), American Express (NYSE: AXP) and Texas Instruments (NYSE: TXN) report third-quarter results after the closing bell.
Parents rejoice: Bratz dolls are going the way of the hula hoop!
The sexed up Barbies on collagen injections that have been the subject of a 9-figure lawsuit involving Mattel (NYSE: MAT) and MGA Entertainment are not expected to be the hit this holiday season that they have been in recent years.
The Wall Street Journalreports (subscription required) that Target (NYSE: TGT) will be slashing Bratz-devoted shelf space by 50%, and annual sales of the dolls are expected to fall 25% to $300 million. Wal-Mart (NSYE: WMT) has also slashed its Bratz orders and many retailers are offering steep discounts on the dolls, indicative of an inventory glut.
The decline of Bratz is bad news for Mattel, which is locked in litigation over rights to a brand that appears to be rapidly declining in value.
In addition, Bratz's risque image is causing problems for the company. Scholastic (NASDAQ: SCHL) has pulled Bratz books from its roster after parents and psychologists complained that the dolls modeled "precocious sexuality."
U.S. stock futures were lower this morning on fear Tropical Storm Gustav's path may pose a threat to refinery activity along the Gulf of Mexico coastline and some would have to shut down. Indeed, oil prices rose to above $117 a barrel Wednesday. Also in focus today is the upcoming durable goods order to be reported before the opening bell. Meanwhile, the FDIC is considering borrowing funds from the Treasury, amid an expected wave of bank failures. Nine banks have failed so far this year, and the number of troubled U.S. banks rose 30% to 117 in the second quarter. [Update: Futures turned positive after durable goods unexpectedly gained.]
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), which stocks jumped big Tuesday, both had several ratings cut by Standard & Poor's. Still, both stocks seem to continue their climb in premarket with Fannie shares up 7.5% and Freddie's up 10%. At least two analysts, from Citigroup and Goldman said Tuesday the situation isn't as bad as it may seem.
From financials to toys: A federal jury awarded Mattel Inc. (NYSE: MAT) $100 million in damages on Tuesday in a federal copyright lawsuit against MGA Entertainment Inc., the maker of the saucy Bratz dolls.
Moving to pharmaceuticals, Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) and Eli Lilly & Co. (NYSE: LLY) shares are down 10% and 1% respectively in premarket trading after four more patients taking their Byetta diabetes medication have died. Baird downgraded Amylin from Buy to Neutral and cut its price target from $37 to $27. Soleil downgraded AMLN from Hold to Sell.
Mattel (NYSE: MAT) scored a big victory when it sued MGA Entertainment over the origin of the wildly popular Bratz dolls, and won. But it looks like the victory won't be as big as the parent company of Barbie would like.
Mattel was seeking $1.8 billion in damages but, on Tuesday, a jury awarded Mattel just $100 million in damages, but The Wall Street Journalexplains that that award "could be further reduced by U.S. District Judge Stephen G. Larson because it contains duplicate damages for the same offense, according to Thomas Nolan, an attorney for MGA." Still to be determined is who will have the right to continue marketing the Bratz brand.
This is a big loss for Mattel. The company spent millions pursuing the litigation -- the amount was large enough that Mattel said it materially affected earnings, and Mattel is a $30 billion company.
This has definitely been one of the more entertaining lawsuits in business news of late and it looks like there will be a few more rounds to go, with MGA Entertainment planning to file an appeal.
4Kids Entertainment Inc. (NYSE: KDE), a licensing operation meant to target kids with various toys and potential fads, suffered through a terrible second quarter. The top line increased 37% to $16.5 million. Sounds pretty good so far, right? Yeah, then we get to the bottom line. The net loss was $0.42 per share. This compares to a net loss of $0.17 per share in the previous year's Q2. And what did Wall Street think the company was going to lose? About $0.23 per share, according to Earnings.com. I'd call that a rather bad shortfall.
The press release promoted the fact that the Chaotic trading-card asset is performing up to expectations. 4Kids is very hopeful that it can create momentum behind the cards and eventually turn them into another Pokemon or Yu-Gi-Oh! franchise. Maybe management can, maybe it can't. That's the problem with 4Kids. It's difficult to retain a desire to allocate investment funds into this stock since you can never really tell what product line is eventually going to win out for the company. It's a constant exercise in speculation. For instance, Teenage Mutant Ninja Turtles was weak this quarter compared to the year-ago period. Who knows if the property will be hot again two quarters from now. Going with a Hasbro, Inc. (NYSE: HAS), a Mattel, Inc. (NYSE: MAT), or a JAKKS Pacific (NASDAQ: JAKK) would probably make for safer sledding.
4Kids' stock is up slightly as I write, and it isn't far from its 52-week low. It isn't cheap, and it isn't a buy. This is the kind of stock you would definitely need to see some momentum strength in before buying. Otherwise, you'd be risking too much. Granted, the stock has been strong the last month or so, but considering today's earnings report, I'd need to see it get well over $10 per share before I'd take another look.
Disclosure: I don't own any company mentioned; positions can change at any time.
LeapFrog Enterprises (NYSE: LF) reported a decent quarter, but I won't be buying the stock. I just think there are better ideas out there in this sector. First, let's play around with the numbers.
For Q2, LeapFrog saw its top line increase by 22% to a little over $68 million. The net loss was 32 cents per share versus a net loss of 44 cents a year earlier. According to Earnings.com, analysts were expecting the loss to be about 44 cents per share. There was, however, a little help from a tax benefit in the quarter; last year, the company recorded a tax expense. LeapFrog not only scored on the bottom line, but it also expanded its gross margin. So, the quarter seemed all right. But, I then look at the cash flow statement and see that LeapFrog has been using cash for operations the last six months. In the similar time period a year ago, LeapFrog reported positive operational cash flow.
LeapFrog's stock was up over 5% in after-hours trading on Monday after the earnings release. The stock has been strong in a bad market according to the AOL Finance snapshot, and the pop in the after-hours session placed it close to a 52-week high. Again, though, I think there are better ideas out there. Hasbro (NYSE: HAS) is a toy company I'd much rather align my portfolio with. I could even look at Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK).
I know that the stock may be signaling better times ahead, and toy companies certainly make their profits in the latter part of the year, but I still am cautious on this business. When I wrote about the company's fiscal year, I also noted bad cash-flow characteristics, as well losses on the bottom line. So, in the end, I just don't want my portfolio to play around with this low-priced equity.
Disclosure: I don't own any company mentioned; positions can change at any time.
Hasbro (NYSE: HAS), big rival of Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK), reported Q2 earnings on Monday, and as Melly Alazraki stated in her Before the Bell article, the toy company had some fun business results. Revenues rose over 13% to $784.3 million, and net income increased over eight times to $0.25 per share. This number beat analyst expectations by three pennies.
Yet, the stock is down today, as of this writing, by over 2%. What the heck? Well, one thing that should be noted on the earnings growth is that it really isn't as huge as it appears on the surface. Last year at this time, the company took back some warrants issued to George Lucas' media empire that caused the GAAP earnings to come in at quite a low number. If you take the effect of them out of the equation, then, unfortunately, earnings only grew this quarter by a measly penny.
Of course, it's also a tepid market day, so that could also be working against the stock. However, inflation is an issue as well. According to this article from Reuters, the specter of rising input costs is being felt. But does this mean I should no longer be bullish on the company? While I feel that inflation is something to watch with Hasbro, I remain bullish on the shares, although I would wait for a pullback so a higher yield can be received for one's investment dollars. It's difficult, I suppose, to be bullish on a toy company when I am personally bearish on both the economy and the equities markets, but I do like the recent strength of Hasbro's stock and I like the prospects for its brands (e.g., Star Wars, Transformers) ahead of the holiday season. Hasbro's portfolio is keeping me going...hopefully it will keep the stock going, too.
Disclosure: I don't own any company mentioned; positions can change at any time.
After hitting a one-year high of $26.12 last July, the stock hit a one-year low of $16.42 in January. MAT opened this morning at $20.42. So far today the stock has hit a low of $19.96 and a high of $21.18. As of 1:05, MAT is trading at $20.48, up $2.20 (12.0%). The chart for MAT looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just six months as long as MAT is above $15 at January expiration. Mattel would have to fall by more than 26% before we would start to lose money. Learn more about this type of trade here.
MAT hasn't been below $16.40 at all in the past year and has shown support around $17 recently. This trade could be risky if the damages turn out to be negligible, but even if that happens, this position could be protected by the support the stock might find around $16.50, where it has bottomed out twice in the past seven months.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MAT.
Advanced Micro Devices (NYSE: AMD) stock is down 6.6% in premarket trading after the company posted its seventh consecutive quarterly loss of $1.19 billion, or $1.96 per share, missing Wall Street estimates. The operating loss would have been 60 cents a share, heftier than the loss of 52 cents a share from analysts polled by Reuters Estimates. Following the report, AMD also announced that CEO Hector Ruiz would be replaced by COO Dirk Meyer. Ruiz will stay on as executive chairman.
The Wall Street Journal reports that Freddie Mac (NYSE: FRE) is considering raising capital by selling as much as $10 billion in new shares to investors. FRE stock is down again this morning after the recent wild swings in share price. This morning FRE shares are trading over 5.7% lower in premarket action.
Mattel Inc. (NYSE: MAT) shares rose nearly 4% in after-hours trading following second-quarter financial results. The toy maker's profit fell by nearly half, but results still beat Wall Street expectations. Global Barbie sales dropped off 6%.
Hasbro (NYSE: HAS) management recently spoke to analysts at its Investor Day conference. Here's the transcript. We all know the deal about these conferences: companies want to put their best foot forward and convince Wall Street that, if things are going good they are about to get even better, or, if things are going bad they won't be as bad as people thought and they will be improving either soon or on a long-term basis. You can bet that it was the latter tone taken by Team Hasbro at the event. In fact, CEO Brian Goldner said something which I thought was quite amazing: did you know that there actually will be a Christmas this year? 
This post is part of a feature on companies and products that our bloggers think are in need of a makeover. 
Today was another strong day in the market, which may be mostly credited to Ben Bernanke giving a carte blanche for another economic stimulus package in his testimony this morning. We saw a rise in California home buying, but that was credited to foreclosure purchases at far lower prices.
Parents rejoice: Bratz dolls are going the way of the hula hoop!
GM and Ford ready weak pitches for taxpayer bucks
Cramer on BloggingStocks: A troika of opportunity and trouble 
Before the bell: Wall Street headed higher; automakers, retailers in focus
