We are upgrading our recommendation on Mattel (MAT: 21.56 +0.31 +1.46%) to Outperform from Neutral. Mattel’s fourth quarter earnings were well ahead of the Zacks Consensus Estimate. The better-than-expected results were primarily driven by strong sales of its Barbie dolls and Hot Wheels cars during the holidays.
Mattel has an industry-leading position, a strong balance sheet and continues to experience the benefits of its cost-containment initiatives. Its focus on top-line growth, margin expansion and cash conservation also augur well.
Considering the company’s product line up in 2010, we also expect an improvement in the top line in the upcoming quarters. However, the continuing economic stress will remain a headwind in the near term as the retail environment remains challenging.
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