4 Key Things from Mattels Q3 Earnings Call That Investors Should Know

By Beth McKennaMarketsFool.com

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Mattel(NASDAQ: MAT)reported third-quarter 2016 results on Wednesday that suggest its turnaround is on track. The leading toy maker's revenue and earnings were flat with the year-ago period. This was an accomplishment, since it means that it has now closed the revenue gap created by losing theDisney(NYSE: DIS)Princess and Frozen licenses to rivalHasbroin 2016.

Strong Barbie sales largely drove results, with help from a turnaround in American Girl doll sales and dependable performers Fisher-Price and the wheels (vehicle) category.

Here are four key things that investors should know from Mattel's analyst conference call:

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1. The Toy Box reality TV series could unearth some winning toys

From Chief Operating Officer Richard Dickson's remarks about the reality series that Mattel and Disney-owned ABC TV Network are launching in 2017:

You may have guessed the fun and familiar concept: Each episode will feature wannabe-professional toy inventors competing in various categories, striving for a place in the finale in which they'll pitch their inventions to a panel of kid judges. The winner of the competition will have his or her toy brought to market by Mattel.

Having kids serve as judges is not only apt, but has the potential to be very entertaining. Beyond the entertainment value, Mattel should be able to find at least one or two toys that have the potential to be big winners.

2. A Barbie movie is coming -- likely in 2017

From Dickson's remarks:

Various entertainment publications have listed a Barbie movie as coming in May 2017, as the analyst who posed a question about the topic to Mattel's top management team said. Dickson wouldn't confirm a date or anything else about the movie.

A movie based upon the iconic fashion doll has much potential to help keep her nascent rebound in sales going. (Barbie sales have increased notably year over over for two consecutive quarters in a row now.) Mattel will probably play it pretty safe with the Barbie flick, in my opinion, but it seems to me that a bolder stroke could be just the ticket for Barbie to lose some of her critics, of which she has many.

3. Disney's Cars 3 movie should rev up toy vehicle sales

From Dickson's remarks:

Mattel's management believes that Disney's Cars 3 movie, slated for release in June 2017, will not only benefit it by driving toys based upon the movie to fly off retail shelves, but also by expanding the size of the entire toy vehicle category. Mattel's Hot Wheels brand is a strong performer, so Cars 3 has the potential to accelerate its already robust sales. Beyond Hot Wheels, Mattel's other vehicles brands should also benefit.

4. American Girl brand's rejuvenation is on track

From Dickson's remarks:

Wellie Wishers is a brand extension of American Girl that's aimed at younger girls, with the dolls somewhat less expensive than the original line. American Girl led the moderate-to-higher priced tall doll category for many years, but has suffered in recent years as competitors poured into the space with similar lines that are more competitively priced.

The distribution expansion that Dickson is referring to includes a new exclusive store-within-a store partnership with Toys "R" Us, a new retail execution at Kohl's, and a new franchise licensing agreement to expand the brand into the Middle East.

American Girl's year-over-year sales rose 14% as reported and 15% in constant currency in the third-quarter. These results suggest the brand could be on an upswingafter a long decline in quarterly year-over-year sales. One quarter, however, doesn't make a trend; the critical holiday quarter should be more telling.

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Beth McKenna has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Hasbro and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.