Today’s news: Quarterly earnings reports from Mattel (MAT), Total (TOT) and Weyerhaeuser (WY); Mattel suspends dividend
Mattel (MAT) reported adjusted third-quarter EPS of $0.09 yesterday afternoon, when analysts expected $0.59 EPS. Here are some third quarter highlights from the company’s press release:
- Sales performance negatively impacted by Toys “R” Us filing for bankruptcy, tighter retailer inventory management and challenges with certain underperforming brands.
- The company announced a significantly expanded initiative to structurally simplify business and right-size cost structure in alignment with strategy; plans to eliminate at least $650 million in net costs over the next two years.
- Suspended quarterly dividend beginning in the fourth quarter of 2017 in order to increase financial flexibility, strengthen balance sheet and facilitate strategic investments.
CEO Margo Georgiadis stated, “with our new leadership team in place, we are taking bold steps to simplify our business and right size our cost structure in alignment with our strategy. This will enable us to move faster to realize our most attractive opportunities as well as to unlock significant resources to invest in our transformation. We are optimistic about the future of Mattel and our ability to reposition the company to drive enhanced returns for shareholders.”
The company’s products include Barbie, Hot Wheels, Fisher Price, American Girl and more.
The share price is down 15% this morning, and I expect it to remain down until January, when tax-loss selling season is behind us. In the interim, I would not be surprised if a private equity firm such as Blackstone Group (BX) swooped in and paid cash for Mattel, since the new management team is in place with a focused business plan, although I certainly have not heard any such M&A talk.
My suggestion is that investors hold MAT for a corporate and share price rebound in 2018. Hold.
Total (TOT – approx. 4.1%) reported third-quarter adjusted EPS of $1.04 today, above all analysts’ estimates, which averaged $0.97. Contributions to the quarterly results included higher energy prices, higher margins, lower operating costs and lower capital expenditures; all resulting in Total’s highest free cash flow (FCF) since the first quarter of 2011. In addition, the net-debt-to-equity ratio dropped below 20%. Total is an integrated oil & gas company based in France.
I removed the Strong Buy recommendation on TOT when the 2018 consensus earnings estimate fell to reflect just single-digit EPS growth. In the meantime, the big rebound in energy companies’ earnings and balance sheets leaves me confident that TOT will continue climbing toward the low 60s, where it last traded in July 2014. Hold.
Weyerhaeuser (WY – yield 3.5%) reported third-quarter adjusted EPS of $0.34 today, when the market was expecting an average of $0.31-$0.32. Revenue came in slightly above expectations. All business segments delivered strong operating results, and the company also projected strong fourth-quarter performance. It’s entirely possible that analysts’ earnings revisions will cause me to recommend the stock more strongly in the coming weeks. In the meantime, WY rose to new all-time highs in October. Hold.