Shares of Mattel (NASDAQ: MAT), the toymaker known for brands like Barbie and Hot Wheels, were flying higher this week after the company received a buyout offer. According to Reuters, Mattel was approached by a private equity firm.
The stock surged on that news on Monday, then pulled back on Tuesday as enthusiasm cooled off before jumping again on Wednesday after it reported better-than-expected second-quarter profits on Tuesday night.
According to data from S&P Global Market Intelligence, the stock was trading up 17.9% for the week.
Image source: Getty Images.
Could Mattel go private?
The news that L Catterton, the private equity arm of LVMH, could be interested in buying Mattel was certainly a surprise as Mattel has been struggling for years, though the Barbie movie gave the company a much-needed jolt. Reuters said L Catterton approached Mattel with an acquisition offer, though Yahoo contradicted that report, and Mattel would not comment on any talks, saying it was confident in its stand-alone strategy. Reuters also speculated that interest from L Catterton could lead to a bidding war with Hasbro possibly joining in.
Later in the week, Mattel reported second-quarter results, narrowly missing top-line estimates, but beating on the bottom line.
Revenue in the quarter fell 1% to $1.08 billion, below estimates at $1.1 billion, as weakness in the toy market persisted, though the company did outperform rival Hasbro. It also continued to deliver solid-margin improvement with gross margin jumping from 45.1% to 49.2%. Adjusted-operating income rose from $75 million to $96 million.
Adjusted earnings per share nearly doubled from $0.10 to $0.19 due in part to higher interest income and a lower tax rate. CEO Ynon Kreiz said, "We are in a strong financial position to execute our strategy to grow our IP-driven toy business and expand our entertainment offering."
What's next for Mattel
Mattel maintained its full-year guidance, calling for flat revenue growth at $5.44 billion and adjusted earnings per share of $1.35 to $1.45, compared to $1.23.
The interest from L Catterton is intriguing, but management seemed dismissive of it. While Kreiz and his team have had success shoring up the business and restoring the brand, Mattel still needs to return to revenue growth if the stock is to achieve a real breakout.
Should you invest $1,000 in Mattel right now?
Before you buy stock in Mattel, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Mattel wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $688,005!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 22, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.
