It's a great time to be a kid again. Following on the heels of positive earnings reports from both Mattel
Yet while JAKKS reported higher revenues in the quarter -- up 12% to $145.3 million -- earnings took a hit as rising fuel and raw-material costs, along with its continuing litigation with spandex-wearing grapplers at World Wrestling Entertainment
With a portfolio of brands that enjoy a broad cachet with kids -- names that include Hannah Montana, NASCAR, Neopets, and its own too-cool EyeClops night-vision goggles -- JAKKS is looking to those brands to help drive growth to record levels this year. Yet analysts are expecting more. Where Wall Street is forecasting sales of $906 million for 2008, JAKKS has reiterated that it will realize just $891 million. That's a 4% increase, to be sure, but it recognizes the tough economic reality, too.
JAKKS took a hit earlier this year, when sales and earnings fell below expectations. I welcomed the fall, because it made what seemed like high-priced shares -- or fairly priced, at least -- much more attractive. At less than eight times analyst forward estimates (and even at 8.5 times JAKKS' own guidance), the toymaker represents a better deal than either Mattel and Hasbro, which are valued at 50% and 100% higher premiums, respectively. Even though smaller than its rivals, JAKKS has a star-studded lineup that can hold its own.
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It seems the common threads holding the toymaker together right now are the higher cost inputs for fuel, transportation, and raw materials, as well as parents' desires to be cautious during a period of economic uncertainty. Yet those parents did spring for toys in the second quarter to placate their little darlings, and with the back half of the year typically the strongest, we may continue to see Jack-in-the-box surprises next time out, too.
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Fool contributor Rich Duprey owns shares of JAKKS Pacific but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.