By Justin Grant
Reuters
Monday, January 29, 2007; 2:53 PM
NEW YORK (Reuters) - Mattel Inc. (MAT.N), the largest U.S. toymaker, posted a higher-than-expected fourth-quarter profit on Monday on strong holiday sales of its T.M.X. Elmo and Barbie lines.
Mattel, also known for its American Girl dolls, said net income rose to $286.4 million, or 75 cents a share, from $279.2 million, or 69 cents, a year earlier.
Analysts polled by Reuters expected the El Segundo, California-based company to earn 66 cents a share.
Sales increased to $2.11 billion from $1.84 billion, topping analysts' average estimate of $1.97 billion.
"They showed strength across the board. Every division looks strong," said Gerrick Johnson, an analyst with BMO Capital Markets. "There's particular strength with the car property, Dora the Explorer and Elmo," said Johnson, who has an "outperform" rating on Mattel's stock.
Gross sales of its Barbie line rose 3 percent both domestically and worldwide during the quarter.
For the past few years, Barbie has faced a stiff challenge from privately held MGA Entertainment's Bratz dolls, but Barbie sales should continue to rise, and Bratz sales appear to have peaked, Johnson said.
Barbie, which has been on the market since 1959, has been revitalized in part by Mattel's introduction of new products, such as its Dancing Princesses line.
But the modest increase in sales represents a mere stabilization, not a full turnaround, of the iconic doll, Citigroup analyst Elizabeth Osur said in a research note.
"Clearly, all eyes will be on the 2007 Barbie line at Toy Fair 2007 to gauge for the potential success," she wrote.
"Without having seen this line, we find it difficult to forecast Barbie sales in 2007," wrote Osur, who has a "hold" rating on Mattel stock.
KING OF THE MUPPETS
The company's quarterly results were also buoyed by strong holiday sales of the T.M.X. Elmo -- the 10-year anniversary edition of the Tickle Me Elmo -- representing the strongest period for the plush red doll since its debut, Mattel Chairman and Chief Executive Robert Eckert said on a conference call.
Since Tickle Me Elmo's introduction in 1996, there have been numerous versions of the doll, including "Knows Your Name Elmo," which greeted a child by name.
"Ten years ago, we sold over a million units. And we said that T.M.X. would likely be the strongest thing since, and it was," Eckert said.
The company did not disclose exact sales figures for the dolls.
Fourth-quarter sales of its Fisher-Price line, including Little People toys and Power Wheels, rose 16 percent to $805 million.
The company said the results of electronic game maker Radica Games Ltd., acquired in October, were included in its fourth-quarter and full-year results.
Full-year revenue rose 9 percent to $5.65 billion, with international sales of its Hot Wheels, Matchbox and Tyco toys rising 5 percent.
Mattel's stock was trading at 18.43 times estimated 2007 earnings, a discount to rival Hasbro Inc. (HAS.N), which was trading at a multiple of 22.08. Hasbro is scheduled to report fourth-quarter results February 9.
Mattel shares have risen 55 percent since falling to a 52-week low of $15.50 about a year ago. The shares were up 2 cents to $23.98 in afternoon trading on the New York Stock Exchange, after rising 1.6 percent earlier in the session.
