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‘Tis The Season For Hasbro, Mattel, Leapfrog

 June 08, 2012 02:51 PM
 


(By Kevin Donovan) Only six-plus shopping months until Christmas and visions of sugar plums are already dancing in toy makers' heads.  Funny how the modifier "all-important" keeps popping up in corporate announcements to describe second-half initiatives leading to the holiday season. 

We took a look at the top three publicly traded toy companies as we approach the summer solstice, thinking ahead to the season of light.  In order of our preference, here's a brief look at each company:

Hasbro (HAS) boasts brands such as Transformers, Littlest Pet Shop, Nerf, Playskool, My Little Pony, G.I. JOE, Magic: The Gathering and Monopoly.  It has long-term partnerships with Lucasfilm, Marvel, Sesame Workshop, Electronic Arts and Zyngan.

[Related -Record Sales For Wal-Mart Stores, Inc. (NYSE:WMT) And Three Stocks That Could Benefit]

The company is looking to cash in on its tie-in with the blockbuster movie Avengers, featuring a cavalcade of Marvel comic book heroes.  Upcoming is a new G.I. Joe movie.

The company saw a 3% decline in revenues in the first quarter, including the impact from exchange rates.

"Our first quarter 2012 results are consistent with the plan we previously communicated for the year," said CEO Brian Goldner.  "We are looking forward to the four major motion pictures coming to global audiences in the next few months as well as the launch of our all-important fall and holiday initiatives in the second half of the year."

[Related -Hasbro, Inc (HAS): Things You Should Know Before Investing In Hasbro]

We like the movie potential.

Hasbro has been a dividend-paying company since 1977 and has increased its payout by 20% or more for the last three years.

Mattel (MAT) brands include the iconic Barbie, Hot Wheels, Matchbox, American Girl, Radica and Tyco R/C, as well as Fisher-Price brands, including Thomas & Friends, Little People, Power Wheels and entertainment-linked toy lines.

In the latest quarter, Mattel noted a decrease in domestic sales and increase internationally, leading to a 2% decline in sales vs. the year-ago quarter, including currency fluctuations.

"The first quarter played out much as we had anticipated," said CEO Bryan G. Stockton.  Which means, in our view, Mattel is betting heavily on Christmas.  "That said, as is often the case this time of year, we have work to do in certain areas across our portfolio of brands, countries and customers as we prepare to successfully execute the all-important holiday season," Stockton said.

 Mattel cut its dividend in 2011 but has raised it this year. 

LeapFrog Enterprises, Inc. (LF) is a developer of educational entertainment for children.  The Learning Path is LeapFrog's proprietary online destination, providing personalized feedback on a child's learning progress and offers product recommendations to enrich the learning experience.  LeapFrog says its products have been used by teachers in more than 100,000 U.S. classrooms.

The company wowed investors by reporting an 81% revenue increase in the first quarter, including fluctuations in exchange rates.  The share price has responded accordingly.  The company pays no dividend.

CEO John Barbour cited significant increases in the company's LeapPad product and accessories, and the company increased guidance for the second half of 2012.

OUR TAKE

We like Hasbro's movie potential and its rich dividend and are buyers.  Macroeconomic headwinds put Mattel's self-professed reliance on a merry Christmas in doubt.  The market already has priced in LeapFrog's good results and rosier forecast, in our view

VALUATION

On a forward PE basis, the three toy makers are similarly priced.  Here's a look at some basics:

 

Price

Forward PE

Div. Yield

52-wk Range

YTD Perf.

Hasbro

$34.87

11.21

4.13%

$30.54-44.48

+11.34%

Mattel

$31.54

11.86

3.93%

$21.87-34.28

+15.87%

LeapFrog

$9.94

13.43

NA

$2.57-10.78

+77.82%

 

 

 

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