(By Rich Bieglmeier) Mattel, Inc. (MAT)is expected to report earnings before the market open on Tuesday, October 16. Wall Street anticipates that Mattel will earn $0.99 for its 3rd quarter. iStock expects the toys and games maker will report earnings that will exceed Wall Street's consensus number. The iEstimate is $1.02 – a 3 cents upside surprise.
Most investors know the company for its iconic brands such as Barbie, Hot Wheels, Matchbox, Toy Story, WWE Wrestling, Batman, and Fisher-Price brands.
In the last four years, Mattel topped Wall Street's estimates eight times, missed earning five times, and hit the street's consensus the remaining three checkups. For earnings, the recipe for trading the right side of the announcement has been simple. When MAT provided a bullish surprise or landed on the target, the stock price gained in the days surrounding earnings eight of 11 quarters. Meanwhile, profit shortfalls led to price declines in four of five bearish surprises.
The average gain in the 11 bull's-eye or better announcements is 5.16 percent. Meanwhile, shareholder lost 6.52 percent when Barbie didn't pull her weight.
A couple of analysts covering MAT raised their outlooks for the current quarter and year at the end of September. Normally, revising earnings higher close to the end of a quarter is a solid sign for bullish investors.
Mattel's chart says the price could take a Hot Wheels' ride either way. Since early July, the stock has based, spending nearly 100 percent of the time trading between $35 and $36. Based on iStock's experience and rule of thumb technical guidelines, we'd expect MAT to move at least $2.50-$3.00 on Tuesday morning's quarterly checkup.
In its last quarterly report, the NASDAQ 100 member saw its cost go down, and its profits margins go up - higher margins equals higher profits. Rising margins helped offset the negative impact of a strong dollar as a little more than half a Mattel's revenue is international. The dollar dropped in the last quarter, which could be a net positive for MAT's bottom-line.
Additionally, accounts receivables and inventory numbers were down in Q2, both in real dollars and as a percentage of revenue. Customers paying on time and fewer products on the shelves are typically positives for margins.
iStock feels expanding margins, an iEstimate above the consensus, and a helpful dollar foretells the potential for a bullish earnings surprise, which have historically benefited shareholders.