Image source: Getty Images.
Stocks failed to make headway in either direction on Thursday as the Dow Jones Industrial Average (^DJI -0.98%) rose slightly and the S&P 500 (^GSPC -0.46%) ticked lower. Both indexes changed less than 0.25% over the trading session despite a flood of fresh corporate earnings results.
Today's stock market:
|
Index |
Percentage change |
Point change |
|---|---|---|
|
Dow |
0.16% |
32.40 |
|
S&P 500 |
(0.07%) |
(1.69) |
Data source: Yahoo Finance.
Financial stocks attracted heavy trading, but only ticked higher as a group, which sent the Financial Select Sector SPDR ETF (XLF -0.58%) up by less than 1%. Meanwhile, a drop in gold prices pushed Direxion Daily Gold Miners Bull 3X ETF (NUGT 7.23%) lower by 8%.
Dozens of companies posted updates on their operating trends as earnings season hit high gear. Two of the biggest movers on Thursday were Mattel (MAT -3.70%) and Royal Caribbean (RCL 0.54%).
Mattel's weak holiday season
Mattel shares dove 18% after its fourth-quarter results revealed a surprisingly weak holiday period for toy sales. Revenue declined 8% overall as the company continued to feel the pain from its lost Disney Princess deal. Several of its core franchises struggled as well, with Barbie sales falling 2%. Executives blamed a "significant U.S. toy category slowdown in the holiday period" for the poor results .
Image source: Mattel.
That slowdown pushed retailers into deep discounting, which pinched sales but also hurt profitability. Gross profit margin slumped by over 3 percentage points to 47% of sales. The weakness carried through to the bottom line, where Mattel reported $0.50 per share compared to $0.63 per share in the prior year period and the $0.71 per share that Wall Street was targeting.
Management highlighted wins in geographies outside of the U.S. and in important franchises such as Hot Wheels, Fischer-Price, and Matchbox. "Even against this difficult backdrop, our core brands continued to show solid growth, and our performance in key emerging markets like China was equally strong," CEO Christopher Sinclair said in a prepared statement. Executives are also optimistic about their product pipeline for the year ahead. Yet, with profitability taking a surprising turn lower, it's understandable that investors would have to ratchet down their earnings expectations.
Royal Caribbean cruises to a beat
Royal Caribbean shares cruised to a fresh 52-week high after the company posted mixed quarterly results paired with an aggressive outlook for the new fiscal year. Revenue held flat at $1.9 billion, but the company posted lower cruise operating expenses and a decline in marketing costs. As a result, operating income jumped 19% to $297 million.
Image source: Getty Images.
Rising interest expenses took a bite out of that figure, but Royal Caribbean still generated $261 million of net income, which translated into $1.22 per share of earnings, up 28% from the prior year. "Bookings are at record levels, the preference our brands enjoy has never been stronger, costs have been well managed, and our guests' satisfaction has never been better," CEO Richard Fain said in a press release .
Fain and his team believe the cruise ship operator is well positioned to meet their aggressive goal of doubling 2014 adjusted earnings in fiscal 2017 while improving return on invested capital to at least 10% (from 6% in 2014). Their official outlook reflected that optimism, as Royal Caribbean sees net yields accelerating to a 4.3% pace from 3.9% last year. With demand looking strong and vacation package prices rising, executives are targeting adjusted earnings of $7 per share, up from $6.08 per share in 2016.
