Highlighted companies include Mattel (MAT), Hasbro (HAS), JAKKS Pacific (JAKK) and RC2 (RCRC).

Shares of Mattel (MAT) have stabilized today, after falling more than 15% yesterday following the release of disappointing 4th-quarter financial results. Both revenues and earnings fell well short of Street expectations, as the global recession put a damper on sales and rising input costs pressured margins.

Worldwide net sales were down 11% year-over-year in the 4th quarter, comprised of a 6% decline in the U.S. and a 20% decline internationally. International sales were negatively impacted by unfavorable movements in currency exchange rates. Among the company's major toy lines, worldwide sales of Barbie were down 21%, Hot Wheels were down 22%, and Fisher-Price sales were down 9%. Only the American Girl brand posted a positive comp, with sales up 5% year-over-year.

During 2009, management has stated that the company will focus on reducing spending in all areas of the business, and on improving efficiency in an effort to support margins and overall profitability. With the global economy continuing to slow, however, we expect the company's revenues and margins to remain under pressure throughout 2009, as consumers scale back on purchasing and potentially trade down to items with lower price points. We currently rate the shares a Hold, with a price target of $11.50.

We note that Mattel was the first of the major toy companies to report fourth-quarter results. Mattel's sales declines could foreshadow challenging results to come from peers Hasbro (HAS), JAKKS Pacific (JAKK) and RC2 (RCRC), which are scheduled to report financial results later this month.