Toy giants Hasbro Inc. and Mattel Inc. are facing a number of headwinds when they report second-quarter earnings, scheduled for July 23 and July 25 respectively.
Stifel analysts are expecting a down quarter for Hasbro HAS, -0.40%[1] with the company continuing to feel the pain of the Toys ‘R’ Us liquidation, surplus inventory in Europe and tough comparisons for the company’s franchise brands, which include Monopoly and Nerf.
“Looking ahead, we assume a return to more normalized growth rates in ‘19, but also see potential headwinds emerging (i.e. input cost inflation),” analysts wrote in a note.
Stifel rates Hasbro shares at hold with a $94 price target.
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Mattel MAT, -2.32%[3] which was downgraded twice in June by UBS and D.A. Davidson, could also face challenges caused by the closure.
“Mattel has a hard 2Q17 comparison due to the ‘Cars 3’ channel fill, and with the expected disruption and light shipments caused by the Toys ‘R’ Us liquidation,” D.A. Davidson analysts said.
D.A. Davidson lowered its stock rating to underperform from neutral. Analysts have a 12-to-18 month price target of $12 on the stock, equal to about a 25% decline from its current level.
In a contrasting view, MKM analysts said about Hasbro that the Toys ‘R’ Us headwind “is now finished,” but there are other challenges to be mindful of: “the shifting European retail landscape, rising transportation costs and higher oil prices.
“These issues keep us from becoming more constructive toward 2019 as Hasbro should benefit from ‘Frozen 2,’ ‘Star Wars: Episode 9’ and the expected rollout of ‘Magic: The Gathering Arena,’” analysts wrote.
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The second quarter will reflect the pressure of “weak performance” for toys related to “Solo: A Star Wars Story,” which was a disappointment for Walt Disney Co.[5] DIS, +0.35%[6]
MKM rates Hasbro shares at neutral with a $92 price target.
The 17 analysts polled by FactSet have an average rating of overweight on Hasbro stock with an average price target of $98.13.
Sixteen FactSet analysts have an average hold rating on Mattel stock and an average target price of $16.54.
Here’s what to expect:
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