Mattel Shares Fall Amid Tariff Concerns

Mattel Inc MAT shares fell 3.8% Monday amid tariff concerns despite above-expected earnings.

The Analyst

KeyBanc analyst Brett Andress reiterated a Sector Weight rating on Mattel.

The Thesis

Mattel’s second-quarter results on July 25 came in above expectations, largely driven by Barbie, Toy Story and continued cost savings, according to Andress.

The company’s 2019 guidance was reiterated but he now feels more realistic than conservative due to last week’s List 4 tariff news, which he estimates could create a $30 million second-half profit hurdle that needs

[swift mitigating."

“All in, despite the strong start to the year, this new tariff uncertainty on top of MAT’s fragile turnaround keep us SW rated,” he wrote in a note.

Tariffs on List 4 will go into effect Sept. 1 at 10%, at a time when the analyst says toys begin to arrive in the United States for the holiday.

Mattel owns 10 facilities in China, making them less nimble vs. competitors over the medium term should tariffs persist, Andress says.

“We view 2H19 as manageable, but still worry about knock-on effects (consumer price elasticity, retailers desire to stock normalized inventory levels, etc.), leading us to keep our FY19E EBITDA unchanged,” Andress said.

Price Action

Mattel shares closed Monday at $12.63.

Related Links

Trade War With Mexico Could Hurt Mattel, While China Spat Affects Hasbro

DA Davidson Cuts Mattel's Price Target Despite Q2 Sales, EBITDA Beat