Will This Price Target Decrease Hurt Mattel (MAT) Stock This Morning?

Story updated at 10 am to reflect market activity.

NEW YORK (TheStreet) -- BMO Capital Markets lowered its price target for Mattel (MAT) to $31 from $33 Friday, reiterating its "underperform" rating for the toy maker.

Mattel fell -0.8% to $36.16 in morning trading.

The firm also lowered its EPS estimates for the company through 2015. Mattel is realizing lower margins according to BMO analyst Gerrick L. Johnson.

"Sales, margins, and EPS were all well below our and Street expectations, with steep declines in just about all sales categories," Johnson wrote. "We had thought that sales of toys tied to the Frozen movie and the benefit in the quarter from a later Easter could have offset declines in core product lines, leading to a 2Q increase in sales and EPS. However, the surprise was just how weak the rest of the business was in the quarter. This is the third consecutive disappointing quarter for MAT, and, unfortunately, we do not see much at retail that would indicate any sort of change in trend."

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

"We rate MATTEL INC (MAT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The current debt-to-equity ratio, 0.52, 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 2.46, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 197.00% to $60.58 million when compared to the same quarter last year. In addition, MATTEL INC has also vastly surpassed the industry average cash flow growth rate of 58.51%.
  • 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 55.97%. 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, the net profit margin of -1.18% trails the industry average.
  • MAT, with its decline in revenue, slightly underperformed the industry average of 5.0%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: MAT Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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