We are downgrading our recommendation on RC2 Corporation (RCRC) from Neutral to Underperform. While third quarter results were ahead of the Zacks Consensus Estimate, primarily due to the benefits of the cost containment initiatives, we note that the company has reported a drop in sales in the quarter.

Also, the holiday season is expected to be a challenge as families are restricting their discretionary spending. Hence, we expect the company to continue to face a difficult operating environment in the near future.

Additionally, the loss of the Thomas & Friends license to Fisher-Price will likely prove to be a significant blow in 2010. Further, the chances of retaining the Wooden track system license when it expires in 2012 have been reduced, in our opinion.Zacks Investment Research

RC2 Corporation’s (RCRC) third quarter earnings of 66 cents per share are ahead of the Zacks Consensus Estimate of 60 cents. Results were driven by cost reduction initiatives implemented by the company though sales reported a drop in the quarter. Net sales were down 4.8% year-over-year to $126.5 million. Sales were reduced by 3% due to unfavorable fluctuations in foreign currency exchange rates. Slightly better results in North America were offset by weak International sales. Foreign currency exchange rates had a negative impact on International sales. Sales in mother, infant and toddler products category decreased 5% year-over-year, driven by lower sales in health/safety and infant toy product lines. Management expects growth in this category in 2010. Sales in preschool, youth and adult products category decreased 5% year-over-year. However, this decline was low when compared with the 15% year-over-year decline in the first half of 2009. ...

Mattel Incorporated’s (MAT) third quarter earnings of 63 cents per share were just a penny short of the Zacks Consensus Estimate of 64 cents. The company had earned 65 cents in the year-ago period. Quarterly results continued to reflect the economic weakness and lack of any movie-based toy lines. Mattel, however, is focused on controlling its expenses. The company is rigidly managing its inventory and has lowered its advertising costs. For the quarter, the company reported operating income of $336.5 million versus $315.3 million in the year-ago period. Worldwide net sales decreased 8% from the prior-year quarter to $1.8 billion. U.S. sales reported a 2% decrease while international sales fell 14%. International locations were negatively impacted by changes in foreign exchange rates. Worldwide gross sales for the Mattel Girls & Boys Brands business unit were down 10% versus a year ago. Worldwide Barbie sales ...

For Immediate Release

Chicago, IL – October 9, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Target Corporation (TGT), Wal-Mart Stores Inc. (WMT), Hasbro Inc. (HAS), Mattel Inc. (MAT) and Citigroup Inc. (C).

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Here are highlights from Thursday’s Analyst Blog:

Target Lowers Toy Prices

In order to woo customers this holiday season, major discount retailer Target Corporation (TGT) recently announced an aggressive price cut on toys. The announcement came on the back of the Wal-Mart Stores Inc. (WMT) news on offering 100 toys for

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In order to woo customers this holiday season, major discount retailer Target Corporation (TGT) recently announced an aggressive price cut on toys. The announcement came on the back of the Wal-Mart Stores Inc. (WMT) news on offering 100 toys for $10 each through the Christmas holiday, up from 10 toys offered last year. Target slashed the price of selective toys by up to 50%, which include the Barbie Fashion Doll ($5), GI Joe Tough Troopers Figure ($14.99), and the Fisher-Price Little People Play 'N Go Farm Set 50th Anniversary edition ($11). The holiday seasons are generally important for toymakers and retailers, who expect an uptick in demand with more children splurging in toy stores. However, toy companies did not reap any benefit in the 2008 holiday sales season due to recessionary effects, as consumers cut back their spending and prioritized their purchases. Realizing the ...

Mattel Inc. (MAT) is not required to submit its toys to independent laboratories for safety tests. However, other toy-makers, clothing manufacturers and companies selling products for young children need to send their samples for third-party testing. The third-party testing law was passed last summer as there was a significant increase in the number of recalls of toys contaminated by lead. Interestingly, a number of those toys had been produced by Mattel and its subsidiary Fisher-Price. According to the new law, third party testing is mandatory for both big and small companies making products for children 12 and under. Strict limits have been set for lead, lead paint and chemicals such as phthalates. However, Mattel’s request to use its own labs has been recently granted by the Consumer Product Safety Commission (CPSC). According to CPSC personnel, Mattel has proved that its labs were protected from unwarranted ...