Another Upgrade After it finished 2021 on “quite a high note,” National Bank Financial analyst Adam Shine predicts Spin Master Corp. (TOY-T) is poised to see “greater strength than usual” in the first quarter of its current fiscal year.
“TOY appeared to enjoy clean sell-through at retail to close out 4Q22 while building up inventory to not only cope with evolving supply chain issues but also given ongoing demand and expectations for DC-licensed product ahead of this week’s release of The Batman,” he said.
On Monday after the bell, the Toronto-based toymaker reported fourth-quarter financial results that exceeded the expectations of both Mr. Shine and the Street despite pre-releasing revenue results on Feb. 1.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $78.3-million, up 52 per cent year-over-year and above both the estimates of both the analyst and consensus ($61.8-million and $59.4-million, respectively). Adjusted earnings per share of 37 cents was a 160-per-cent jump and also above forecasts (31 cents and 22 cents) as margins topped expectations.
“Despite supply chain issues, TOY successfully got product to retailers amid strong consumer demand for PAW Patrol products as well as licensed offerings,” said Mr. Shine.
“TOY’s revised 2021 outlook called for GPS to grow mid-teens (it was 20.9 per cent), Total Revs to be up slightly above 20 per cent (it jumped 30.0 per cent), and Adj. EBITDA margin to be at the high end of mid-to-high teens (it was 20.3 per cent). Important to note is that the PAW Patrol movie contributed $26-million of distribution revs in 3Q21. The company’s 2022 guidance adjusts for the latter, as TOY expects mid-to-high single-digit growth in GPS and also Total Revs (ex-$26-million) plus Adj. EBITDA margin similar to 2021′s 19.25 per cent ex-$26-million. 1Q22 appears poised for greater strength than usual.”
Touting its “strong” free cash flow and emphasizing its “cash pile continues to grow,” Mr. Shine raised his target for Spin Master shares to $66 from $63, keeping an “outperform” rating. The average is $57.18.