4Kids Entertainment (NYSE:KDE) is an interesting business -- it truly is a hit-or-miss affair, since it tries to profit from the popularity of licensed properties for the younger set. If it can stumble upon a fad situation, then the revenues pour in. When the fad is done, the excitement wanes. The company reported earnings last week -- what do they say about its current prospects?
For the fourth quarter, net sales revenue declined 22% to $18.3 million. A net loss of $0.18 per diluted share compared unfavorably to a net profit of $0.04 per diluted share observed in the year-ago period. The current net loss included a penny of positive income linked to discontinued operations, while the previous year's quarter consisted of $0.13 in positive income credited to discontinued operations. I guess things aren't in fad mode right now for 4Kids.
But the company does count some high-profile names in its portfolio of licensed properties -- Yu-Gi-Oh, Cabbage Patch Kids, and Teenage Mutant Ninja Turtles are part of the lineup. 4Kids also runs a block of programming on News Corp.'s (NYSE:NWS) Fox entity to promote its characters. It's been a while since Pokemon was all the rage, so 4Kids is hoping that some other universes will bring back the glory.
That's the idea with Microsoft (NASDAQ:MSFT) and its Viva Pinata property announced back in the fall. A card game dubbed Chaotic will hopefully become an engrossing hobby for many a kid.
And then we have the cowabunga event of them all -- the soon-to-be-released new Turtles movie, titled TMNT, from Time Warner (NYSE:TWX) and The Weinstein Company. Remember the live-action films from the past? Well, this time around, the Turtles will be doing their thing via computer-generated animation. 4Kids would love it to be a big hit, since kids everywhere might end up demanding the toys as a result.
As far as investing in the company goes, I personally would be cautious. The stock is trading not too far from a 52-week high, there's no guarantee that the company's current mix of licensed products will yield any intense fads, and earnings have been declining. 4Kids just doesn't offer the safety of other toy companies such as Hasbro (NYSE:HAS) and Mattel (NYSE:MAT). Those businesses possess portfolios which contain more perennial-type brands. Betting on the long-term prospects of icons such as Barbie and Monopoly might offer better potential. Plus, both those companies have stocks which offer the cushion of dividend payments -- Hasbro and Mattel currently yield more than 2% each. I recently wrote about Hasbro and found its earnings picture much superior to 4Kids' report.
4Kids is not my favorite investment idea right now. I do hope the TMNT film is a big hit, though -- who can't appreciate mutated turtles?
Have fun with some related Foolishness:
Hasbro and Time Warner are Motley Fool Stock Advisor selections. To see what other investment plays are in this toy chest, take a free 30-day trial of the newsletter today. Microsoft is an Inside Value pick, and Mattel is a former selection of that service.
Fool contributor Steven Mallas owns none of the companies mentioned. As of this writing, he was ranked 11,855 out of 24,438 investors in the Motley Fool CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.
