Goldman Sachs Comments on Mattel's (MAT) Negative Pre-announcement (HAS)

Goldman Sachs maintained a Neutral rating on Mattel Inc. (NASDAQ: MAT) with a price target of $29. Earlier its CEO resigned and it reported soft preliminary Q4 results.

Commenting on developments, analyst Taposh Bari said, "Disappointing results and a change in leadership will likely refocus investor attention to dividend sustainability and normalized EPS power for MAT. We note that this quarter, the company was able pull working capital levers to generate cash flow over $1bn in operating cash flow, above our expectation despite lower earnings. Moreover, the company exits the year with a cash balance of $971mn, within its target range. With that said, the company’s payout ratio for 2014 was 100%, well above management’s target of 50%-60%."

"The leadership change will likely lead to new strategies and, perhaps, new financial targets. We expect to hear more about the forward strategy on the company’s earnings call on Friday, January 30," continued the analyst.

Commenting on Buy-rated Hasbro (NASDAQ: HAS), Bari said, "We remain Buy rated on HAS. We believe that many of MAT’s issues are isolated to the company’s brands. However, we believe that a weaker key competitor is not good for near-term industry health. We continue to like HAS for its strong product pipeline fueled by key entertainment properties including Jurassic World, The Avengers 2 and Star Wars."

For an analyst ratings summary and ratings history on Mattel Inc. click here. For more ratings news on Mattel Inc. click here.

Shares of Mattel Inc. closed at $28.04 yesterday.

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