CIBC initiated Nortel Networks (NYSE: NT) with a Sector Performer rating based on what they see as the company's limited growth and margin prospects.
Needham initiated Juniper (NASDAQ: JNPR) with a Hold rating, citing valuation.
Blockbuster (NYSE: BBI) was initiated with a Hold by Needham, which would like to see if the company's turnaround is sustainable before becoming more constructive on the shares.
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.
Time Warner's (NYSE: TWX) The Dark Knight will not rest. According to Boxofficemojo, the superhero flick finished in first place yet again over the weekend. It grossed an estimated $26 million at domestic theaters. Sony's (NYSE: SNE) Pineapple Express put forth a valiant effort to beat the Bat, but it came up a little short. That film came in second with roughly $22 million for the three-day weekend. It debuted on Wednesday, and its total gross to date is around $40 million. Sony was smart in opening it early so that it might gain some positive word of mouth for the weekend. Any movie going up against Dark Knight needs whatever assist it can get. Seth Rogen and Judd Apatow are becoming quite the Hollywood kings of R-rated youth-targeted comedies, and Pineapple Express will only serve to further cement their dominion in Tinsel Town.
Coming in third was The Mummy: Tomb of the Dragon Emperor, distributed by General Electric's (NYSE: GE) Universal. The fantasy flick took in $16 million and its total tally stands at $70 million. An okay performance, but nothing special. The Sisterhood of the Traveling Pants 2 from Time Warner was in fourth place with a $10.7 million take. That wasn't too good for a film that I thought had a lot of buzz, but the budget on the project isn't too steep at under $30 million, so maybe this one will do all right. Sony's Step Brothers took hold of fifth position. Disney (NYSE: DIS) continues to do horribly with its bomb Swing Vote. It dropped to ninth place.
So Time Warner's studio division will have the success of The Dark Knight to look forward to in future quarters as the movie, which now has over $440 million to its credit, progresses through home video and other ancillary channels. Disney will not have anything to look forward to from Swing Vote. And here's something else for Time Warner: Star Wars: The Clone Wars opens August 15. Time Warner will bring the cartoon to the silver screen ahead of the animated TV series that is set to debut later on. I think Clone Wars will surprise everyone by doing better than expected. The merchandise from Hasbro (NYSE: HAS) is out in the marketplace now pushing George Lucas' new chapter in his famous franchise. May the Force be with the multiplex.
Disclosure: I own Disney and GE; 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.
Stock futures were higher this morning after Bank of America joined recent financials and topped Wall Street estimates. Also pushing futures higher is a deal in the pharma sector with Roche bidding nearly $44 billion for the rest of Genentech. However, both Merck and Schering-Plough said they'll postpone reporting their financial results after the close; Apple will also be reporting results then. Finally, oil prices came off a six-week low and are trading back above $130 a barrel due to escalating Middle East tensions. Higher oil prices could dampen the mood on the Street.
Bank of America Corp. (NYSE: BAC), the biggest U.S. consumer bank and home lender, said profit fell 41% to $3.41 billion, or 72 cents a share, much better than analysts estimates of 21 cents according to Bloomberg. The bank curtailed loan losses, adding $2.2 billion to loan loss reserves. The bank has completed the purchase of Countrywide Financial Corp. on July 1. With these results, BAC joins other big banks that have recently reported better-than-expected results. BAC shares are up 8.6% in premarket trading.
Roche Holding on Monday said it was offering $43.7 billion to take over the remaining 44.1% shares of Genentech Inc. (NYSE: DNA) for $89 per share, 8.8% above DNA's closing price Friday. DNA shares are up nearly 18% in premarket trading to $96.50.
Yahoo! Inc. (NASDAQ: YHOO) said Monday morning it settled its fight for control of the board with billionaire investor Carl Icahn. The board will expand to 11 members to include Icahn and the remaining two seats will be filled by the board upon the recommendation of its nominating and governance committee. In addition, Icahn, who owns about 5% on Yahoo common shares, agreed to withdraw his nominees for consideration at the annual meeting and to support the board's nominees. YHOO shares are declining 2% in premarket trading.
Mattel (NYSE: MAT), a toy company that competes with Hasbro (NYSE: HAS) and JAKKS Pacific (NASDAQ: JAKK), got some good news earlier this week. Its stock was upgraded by analyst Gerrick Johnson of BMO Capital Markets, according to the AP, although it wasn't necessarily an overwhelming vote of confidence. The analyst is switching the rating from "underperform" to "market perform," and if you check out the AP piece, you'll see that he basically is saying that while he doesn't see a big reason to sell the stock, he doesn't see a big reason to buy it either. This was a call based on simple valuation.
I was glad when I read this clarification because, when I first spied this headline, I was a bit flummoxed. I honestly didn't expect Mattel to receive some huge upgrade at this point, even though I agree that the stock is certainly cheap. My main reason for this hinges on the best-of-breed character of Mattel's colleague Hasbro. I just wrote about this company and the strength of its stock at the beginning of the week, and if I were to buy any toy business right now, it probably would be the maker of Monopoly and Mr. Potato Head. Hasbro's got the brand strength as well as the stock strength, it seems, and even though Mattel packs a dividend-yield punch at over 4%, this market might be too tough to go with companies that are nowhere near a bullish trend.
Long-term, the maker of Barbie will rebound. Short-term, it may languish. So you'll have to consider your timeframe when taking a look at Mattel and Hasbro. Mattel does have a nice yield, but Hasbro and its product portfolio could be better positioned come the holiday season. It's going to be an interesting battle between these two rivals once the weather turns cold...
Disclosure: I don't own any company mentioned here; positions can change at any time.
CNNMoney over the weekend reviewed the first half of the year for the markets. Among its lists of winners and losers, one stock got my attention.
Believe it or not, Hasbro (NYSE: HAS), a competitor of Mattel (NYSE: MAT) and JAKKS Pacific (NASDAQ: JAKK), was up quite nicely through the end of June. How nice? The stock increased in value by almost 40%. That's impressive, but is it persuasive? What I mean is, should one believe that the company's first-half strength is an undeniable indication that the trend will continue for the rest of the year?
I have been bullish on Hasbro and I think it's a great company that should benefit from the upcoming holiday season, but should doesn't necessarily imply would. We are in what I would call an all-bets-are-off market. The bears, and their claws, are slashing their way through the hallowed halls of Wall Street, and if the negative-wealth effect really gets going, thus further damaging consumer confidence, then one would have to wonder how Hasbro will fare in the second half of the year.
Without a doubt, though, put Hasbro on your watch list and perform some due diligence on the company. It's got some great brands in its portfolio like Monopoly and Transformers, and keep in mind that its Star Wars line is due to receive a nice catalytic jolt from the upcoming Star Wars: The Clone Wars animated project. Hasbro's stock dropped almost 7% in the last month. This followed a lot of up months. If the stock experiences a further pullback, and the dividend yield rises, it may become attractive.
Disclosure: I don't own any company mentioned; positions can change at any time.
Remember that movie deal that Hasbro (NYSE: HAS) signed not long ago with General Electric's (NYSE: GE) Universal Pictures for the express purpose of bringing some of its board game brands to the big screen? Well, I'm happy to report that the first one appears to be in development. And it's the one I was rooting for!
According to the Hollywood Reporter, the Ouija board is getting the big-screen treatment. Sure, Ouija boards have been featured in films before; heck, my friends and I used a Ouija board in a short film we made years ago. But, this time, Hasbro is hooking up with Michael Bay and his Platinum Dunes production company to give the concept a proper cinematic adaptation, one specifically geared, I have no doubt, to increase the value of Hasbro's brand equity and to, like this needs to be even stated, sell more Ouija boards!
Michael Bay is a pretty competent producer/director. He was responsible for Transformers, as I'm sure you'll recall, and he's been hard at work the last few years on remakes of famous horror films. He's already been involved with remakes of The Amityville Horror and The Texas Chainsaw Massacre, and he is working on new takes of A Nightmare on Elm Street and Friday the Thirteenth. He'd better get the latter right, since it's one of my favorite films!
The Marvel Entertainment (NYSE: MVL) release of the box office hit Iron Man, still No. 1 in world wide distribution, has got Hasbro Inc. (NYSE: HAS) rethinking its potential opportunities to leverage its stable of characters into larger than life features.
Under the terms of its new deal with Sunbow Productions, Hasbro has regained ownership of 1,000 hours of cartoons featuring G.I. Joe, Transformers, My Little Pony and Littlest Pet Shop.With the tremendous success of the live action Transformers movie, and a second Transformers as well as a G.I. Joe live action film in production, Hasbro clearly wants full control over its intellectual properties in order to maximize their exploitation.
Hasbo closed yesterday pennies off it's 52-week high of $37.35 and is trading around $36 midday today. Meanwhile Marvel also closed yesterday just off it's 52-week high of $35 closing at $34.27. It is down now in midday trading around $34.50. However, it is up since I posted Chasing Value: Marvel's Iron Man will be HUGE!
UPDATE: HAS closed at $36.26 down -$0.93, and MVL closed at $33.73 down -$0.54.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not hold any position or own shares of HAS or MVL.
Toymaker JAKKS Pacific (NASDAQ: JAKK) lost the expectations game earlier this week, my friend. Wall Street was looking for more in terms of earnings per share than the company was apparently able to deliver. Was JAKKS playing around too much these last three months? Who knows -- this business can certainly be fickle, after all.
For the first quarter, JAKKS saw its revenues increase over 5% to nearly $131 million. Earnings per diluted share came in at $0.03 if you take into account litigation expenses, restructuring charges, etc. On an adjusted basis, JAKKS earned $0.13 per share, compared to a year-ago adjusted earnings of $0.14 per share. According to Briefing.com, this was $0.06 less than what the Street wanted.
JAKKS, which competes with Hasbro (NYSE: HAS) and Mattel (NYSE: MAT), didn't have a great quarter, it's true. But I've always found this company and stock to be an interesting one, as it seems to do well over time with its various licensed products, such as merchandise based on some Disney (NYSE: DIS) brands, including Hannah Montana, and toys based on Viacom's (NYSE: VIA) Nickelodeon channel.
Whenever the stock is on a pullback, it always catches my attention (although, I should point out, I have never owned it). In addition, the balance sheet appears to be in good shape: there's a nice amount of cash and cash equivalents at $238 million, long-term debt has remained stable, and the accounts receivable line is down.
JAKKS is still forecasting $2.91 per diluted share for the current fiscal year. Given the share price as of this writing, the P/E ratio on the stock remains compelling.
Disclosure: I own shares of Disney; positions can change at any time.
Mattel's (NYSE: MAT) Q1 earnings report wasn't as fun as its toys, I can tell you that. Let's start at the top line -- net revenues declined by 2%. Operating income was negative -- the company booked a loss of $36.5 million; in the previous year's quarter, operating income was positive at $20.6 million. Mattel had a net loss of $0.13 per diluted share this year versus net income of $0.03 per diluted share in Q1 2007. Gross margins also saw pressure in the current quarter.
Oh, are the powers that be over at Hasbro gloating today or what! While Mattel's stock price, as of this writing, is down 9%, Hasbro's (NYSE: HAS) stock price is rising almost 8%. That's because Hasbro reported a nice profit instead of a loss -- see Eliza Popescu's entry about that toymaker's delightful earnings missive to investors.
Mattel obviously had problems getting people excited about its various brands during the last few months, but maybe the summer will help the company out, as merchandise based on the new Batman and Speed Racer films are set to hopefully win the hearts of kids and collectors everywhere when the movies hit the multiplexes. And Mattel's stock does have an interesting yield at the moment. Still, if I were trying to decide between Hasbro and Mattel, I think I'd probably go for the former -- Hasbro does have the rights for toys from the new Marvel (NYSE: MVL) projects -- Iron Man, The Incredible Hulk -- and it does have the Transformers and Star Wars brands. There's no way to spin this, I guess -- it just wasn't Mattel's day.
Disclosure: I own shares of Marvel; positions can change at any time.
Shares of world's second biggest toy company Hasbro Inc. (NYSE: HAS) have been been rallying in early trading after the company reported better-than-expected first quarter earnings, as its strong international business was able to offset declining domestic sales.
Hasbro said that its profit jumped 14% to $37.5 million, or 25 cents per share, helped by strong sales in its Transformers and Littlest Pet Shop lines. These numbers are up from $32.9 million, or 19 cents per share, a year earlier. Analysts, on average, expected earnings of 14 cents.
The toymaker also posted posted a respectable growth of 13% for its first-quarter revenue, which climbed to $704.2 million from $625.3 million. During the period, Hasbro benefited from the weak dollar which was a major driver for its international sales. The company saw overseas sales rise 22% to $248.3 million while revenue in the U.S. and Canada rose only 6% to $428.5 million. Analysts expected $582.2 million in sales in the first quarter, according to Reuters Estimates.
MOST NOTEWORTHY: PetSmart, Marsh & McLennan and Pinnacle Airlines were today's noteworthy upgrades:
Banc of America upgraded PetSmart (NASDAQ:PETM) to Buy from Neutral on valuation, as they believe the market is overly negative on the company's cyclicality.
Keefe Bruyette upgraded shares of Marsh & McLennan (NYSE:MMC) to Outperform from Market Perform on increased confidence management will be able to improve margins.
JP Morgan upgraded Pinnacle Airlines (NASDAQ:PNCL) to Overweight from Underweight citing the company's FCF and contract certainty.
OTHER UPGRADES:
Hasbro (NYSE:HAS) was upgraded to Buy from Hold at Needham.
Calyon raised Airtran Holdings (AAI) to Add from Neutral.
Liberty Entertainment (LMDIA) was raised at Merrill to Buy from Neutral.
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Analyst upgrades:
Hasbro
Stock futures were higher this morning after Bank of America joined recent financials and topped Wall Street estimates. Also pushing futures higher is a deal in the pharma sector with Roche bidding nearly $44 billion for the rest of Genentech. However, both Merck and Schering-Plough said they'll postpone reporting their financial results after the close; Apple will also be reporting results then. Finally, oil prices came off a six-week low and are trading back above $130 a barrel due to escalating Middle East tensions. Higher oil prices could dampen the mood on the Street.
Here are some highlights from this past week's 
Toymaker 
Mattel
Shares of world's second biggest toy company .gif){kind=logo}
Stocks have their worst week in six years
Why haven't the Republicans said much about the economy?
Chasing Value: Are you watching WaMu?
