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Why Shares of Mattel Popped 10% Thursday

By Daniel Miller – Apr 9, 2020 at 3:01PM

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The Federal Reserve announcing more economic support has stocks rising.

What happened

Shares of Mattel (MAT -1.24%), a toy company with brands such as Barbie and Hot Wheels, jumped more than 10% Thursday afternoon as markets continued to rally after the Federal Reserve announced a new $2.3 trillion round of loans to support consumers and small businesses.

So what

The Fed also announced Thursday that it will create a municipal liquidity facility with up to $500 billion in loans and $35 billion in credit protection to help state and local governments. "The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible," Fed chair Jerome Powell said. 

Pile of children toys

Image source: Getty Images.

The government has shown investors it will take extraordinary measures to ensure we get through the COVID-19 pandemic and get the economy back to a more normal state as soon as possible. That's music to the ears of many businesses, including Mattel, that have been hit hard due to social distancing and purchasing trends that heavily favor consumer staples.

One positive development for Mattel investors was the announcement that Joseph Euteneuer's tenure as CFO would be extended due to the "unprecedented events surrounding COVID-19 and the disruption to the global economy." Euteneuer was to leave the company after a transition period of up to six months, but this extension will provide more certainty and stability for the company during the pandemic. 

Now what

The coronavirus came as Mattel's turnaround was gaining traction, with profitability turning the corner in 2019. Management's focus on core brands, winning new licenses, and improving the speed of its supply chain, along with extracting hundreds of millions of dollars in costs, has put the company in a much better position for earnings growth in a post COVID-19 environment.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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