Mattel: Bad News Buy?

02/07/2014 7:00 am EST

Focus: STOCKS

Jack Adamo

Editor, Jack Adamo's Insiders Plus

Despite bad news for Barbie sales, Jack Adamo continues to see long-term value at this leading toy maker. Here's the latest from his Insiders Plus newsletter.

Mattel Inc. (MAT) reported Q4 net income of $1.07 per share, compared to last year's $0.87, but there were one-time items that made the comparisons seem better than they were.

Net sales decreased 6%. North American sales plummeted 10%, while international sales were flat.

For the year, the company reported net income of $2.58 per share, compared to last year's $2.22 per share, but, again, there were a lot of items. Net sales increased 1%. Full year gross sales were down 2% in North America and up 5% internationally.

Cash flow was also disappointing, primarily driven by higher working capital usage, partially offset by higher net income. For the year, net cash flows, from operating activities, were approximately $698 million, down from $1.28 billion in 2012.

On the face of it, I'm not too put off by these numbers. The toy business is inherently lumpy, due to the timing of new products, especially film-related toys.

Moreover, the economy is weak and retail, as a whole, had a disappointing Christmas season, except for the luxury retailers.

Mattel is one of the best companies in its industry and it's an industry that is, somewhat, more recession-resistant than the rest of the economy, so I don't expect results to stay down for too long.

That's not to say the stock won't suffer periodically; the public doesn't think-through the lumpiness issue. But I would expect Mattel to significantly outperform the market in the decade ahead, as it has in the past.

Subscribe to Insiders Plus hereā€¦

More from MoneyShow.com:

Retailers: Low-end to Luxury

Best Buy is still a Great Buy

Contrarian Shopping Among Retailers

Related Articles on STOCKS