Will This Downgrade Hurt Mattel (MAT) Today? (Update)

Update (9:42 a.m.): Updated with Friday market open information.

NEW YORK (TheStreet) -- Argus downgraded Mattel  (MAT) to "hold" from "buy" and noted that several factors could weigh down the company's 2014 results.

The stock was falling 1% to $36.69 shortly after the market opened on Friday.

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Separately, TheStreet Ratings team rates MATTEL INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MATTEL INC (MAT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MATTEL INC has improved earnings per share by 23.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, MATTEL INC increased its bottom line by earning $2.60 versus $2.21 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus $2.60).
  • The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, MAT has a quick ratio of 2.20, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Leisure Equipment & Products industry and the overall market on the basis of return on equity, MATTEL INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • The gross profit margin for MATTEL INC is rather high; currently it is at 54.46%. Regardless of MAT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAT's net profit margin of 17.47% compares favorably to the industry average.
  • You can view the full analysis from the report here: MAT Ratings Report

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