Will Mattel (MAT) Disappoint Again This Earnings Season? - Analyst Blog

California-based toymaker Mattel, Inc. MAT is set to report its first-quarter 2014 results on Apr 17, 2014, before the opening bell.

In the last quarter, it posted a negative earnings surprise of 10.83%, primarily affected by weak sales and higher advertising and promotional expenses. Let's see how things are shaping up for the upcoming announcement.

Factors to Consider this Quarter

Mattel has been reeling under pressure for quite some time now due to deteriorating sales of some of its most popular brands such as Barbie, Hot Wheels, Monster High and Fisher-Price. In fact, lingering consumer spending uncertainty amid sluggish economic growth in the U.S. hit this toymaker hard, with shares slumping almost 19% year-to-date.

However, we remain positive about the company's acquisition of the Canadian toymaker Mega Brands in March, this year. The acquisition would help Mattel to expand in two of the fastest-growing toy categories — construction building sets and arts & crafts categories

Despite this, Mattel faces saturation in the domestic market with North American sales decreasing 2% in 2013. Even though the company's international sales increased 5% in 2013, we are concerned about the challenges that the emerging markets face from weakening currencies.

Additionally, the company has seen no movement when it comes to current-year estimate revisions over the past 30 days. In fact, the consensus for earnings has remained stable at 8 cents per share over the same time period.

Earnings Whisper?

Our proven model does not conclusively show that Mattel is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Mattel is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 8 cents.

Zacks Rank: Mattel has a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the broader consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Chipotle Mexican Grill, Inc. CMG, with an Earnings ESP of +1.06% and a Zacks Rank #3.

MGM Resorts International MGM, with an Earnings ESP of +30.00% and a Zacks Rank #2 (Buy).

Las Vegas Sands Corp. LVS, with an Earnings ESP of +2.17% and a Zacks Rank #2.