Mattel designs, manufactures, and markets a variety of toy products worldwide through global brands including Barbie, Hot Wheels, American Girl, and Fisher-Price. The company also holds a licensing agreement with Walt Disney, which allows it to capitalize on classic Disney characters, such as Mickey Mouse and Winnie the Pooh.

Mattel had 17.2% of the U.S. toy market in 2008, up 30 basis points over 2007 and topping cumulative share gains for the seven next-largest toy makers. Its iconic Barbie brand had 30% of the market for fashion dolls, up 1.2 percentage points over 2007.

The company reported 1st qtr 2009 earnings of $-0.14 per share inline with the consensus estimate of $-0.14. Performance in 1st qtr 2009 was impacted by lower sales and currency translation effects. Total worldwide gross sales for the 1st qtr 2009 were down 15% including a 7 percentage point negative impact from changes in exchange rates. U.S. sales were down 6% and international sales were down 23% including a 13 percentage point negative impact from foreign exchange. 

For 2nd qtr 2009, analysts’ estimates range from $-0.06 to $0.06, with a consensus estimate of $0.02. The company’s earnings will continue to be impacted by the foreign-currency exchange effects of a stronger U.S. dollar, consumer pullbacks, retailers' desire for less inventory, and a relatively light year for blockbuster movies that can generate toy tie-ins.

On the positive side, in the US, Barbie has regained momentum in the Girls toy business. Lot of sales are expected around Golden Anniversary doll, Matchbox truck, and Mindflex game. In November 2008, Mattel cut 1,000 jobs worldwide, or about 4% of its workforce, and it is taking other cost-cutting steps related to outsourcing information technology services and reducing the number of items in its product lineup. So, Mattel remains on track for $90 million to $100 million in net cost savings in 2009 and $180 million to $200 million in savings by the end of 2010.

For 2010, Mattel has the toy rights tied to a Walt Disney Co. (NYSE: ) animated musical based on the Rapunzel story that will feature the same musical team who wrote the music for the movies "The Little Mermaid" and "Beauty and the Beast." Mattel also has the toy rights to Disney Pixar Animation Studios Inc.'s "Cars" movie. McGowan said the full-length animated sequel is coming in 2011 and Mattel has the toy rights for it, too.

Mattel’s secular gross margins are expected to inch up to 50% as it passes along pricing better than it has in recent years and produces innovative, higher margins products. However, the company’s products are facing stiff competition from alternatives such as video games, due to the shift in children's growing attraction towards video games.

The company’s EPS in the 2nd qtr 2009 is expected to meet the consensus analysts’ estimate. Currently, the stock is trading at $15.42 off the 52 week high by $6.53. The stock seems to be fairly over valued at current levels.