On Wednesday, BofA Securities adjusted its outlook on RTX Corp. (NYSE: RTX), raising the price target to $110 from the previous $100, while keeping a Neutral rating on the stock. The firm noted Mattel's (NYSE: NASDAQ:MAT) first-quarter adjusted earnings per share (EPS) came in at -$0.05, outperforming their estimate of -$0.12. This performance was attributed to a significant increase in gross margin, which reached 48.3% compared to BofA Securities' forecast of 44.0%. The improvement in gross margin was largely due to lower inventory management costs, deflation, and cost savings.
Mattel's growth in gross billings was spearheaded by a 5% increase in Hot Wheels, whereas both Barbie and Fisher-Price remained stable. Following these results, BofA Securities has revised its calendar year 2024 EPS projection for Mattel to $1.44, up from $1.40. This adjustment reflects a series of anticipated changes in Mattel's sales trajectory, including a 2% increase in the second quarter as the company moves past channel destocking from the previous year.
Additionally, the firm anticipates a 3% sales decline in the third quarter due to challenging comparisons with the prior year's strong Barbie sales, which saw a 17% increase in gross billings in the third quarter of 2023. For the fourth quarter, sales are expected to remain relatively flat. This projection is based on the belief that Mattel will gain market share and expand shelf presence for key brands in retail stores during the holiday season, despite facing a more challenging retail calendar.
In light of these considerations, BofA Securities reaffirmed its Buy rating on Mattel and increased its price objective to $26 from $25. This new target is based on a 16-17 times multiple of the firm's estimated calendar year 2025 earnings per share, which is a slight increase from the previous multiple of 18 times calendar year 2024 earnings per share.
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