Mattel Plays It Right

It was a good quarter for Mattel (NYSE:MAT) even though Barbie and Hot Wheels continue to meander. The toy giant posted a healthy 8% uptick in worldwide net sales for the second quarter, on the strength of buoyant international business and the popularity of the company's toys licensed after summer multiplex blockbusters.

The company earned $0.08 a share before a $0.02 per-share tax benefit. That was twice what Wall Street analysts had been expecting and is a healthy advance from the $0.05 a share that the company had earned a year earlier before repatriation expenses.

Most of the industry's sales take place in the second half of the year, so there's only so much we can read into this quarter's performance. Disney's (NYSE:DIS) Cars and Time Warner's (NYSE:TWX) Superman Returns have been huge box office hits, and that makes Mattel's job easy when it comes to moving licensed playthings.

You still have to give Mattel some credit here. Its Fisher-Price lines grew by 8%. American Girl, which may or may not be cannibalizing Barbie sales by weaning girls off the hourglass-figured dolls and into pricier larger ones with more personalized features, saw its business climb 5% higher globally during the quarter.

These are the little things that one can take away from the quarter -- the upticks elsewhere, the fact that Barbie sales only dipped by 1% worldwide. You also have a potential turnaround here in terms of momentum. Before this morning's market-thumping report, Mattel had come up short in four of its five previous quarters. You also have to go back to the 1990s to find the last time Mattel earned as much as $0.08 per share during this seasonally sleepy quarter.

Toy stocks can pay off for adult investors. In 2004, Philip Durell made Mattel one of the first stock recommendations for his Inside Value newsletter service. David Gardner has singled out Hasbro (NYSE:HAS) for his Stock Advisor premium research service. And Mathew Emmert has picked Newell Rubbermaid (NYSE:NWL) -- the maker of Little Tikes toys -- for his Income Investor newsletter.

Today is Mattel's moment to shine, though. The third and fourth quarters will be more critical, given that they are materially more potent and Mattel won't have the same kind of boost from Superman and Cars as the franchises wrap up their cinematic runs. The second quarter is a good start. Now it's time to prove that Mattel doesn't need Hot Wheels to keep the good times rolling.

Longtime Fool contributor Rick Munarriz is a kid at heart. He owns shares of Disney. Disney and Time Warner are Stock Advisor picks. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.