* Q2 EPS 23 cents vs analysts' estimate of 16 cents
* Q2 sales $1.16 bln vs estimate of $1.11 bln
* Barbie sales rise 12 pct worldwide
* Shares up about 2 pct (Adds analyst quotes, updates shares)
By Helen Chernikoff
NEW YORK, July 15 (Reuters) - Mattel Inc (MAT.O), the world's largest toy company, reported a higher-than-expected quarterly profit on strong sales of its Barbie dolls and toys based on the "Cars 2" movie.
The sales increase shows the growing global reach of Mattel. International sales increased 12 percent, excluding currency fluctuations.
"They're looking to have a great year," said Wedbush Securities analyst Edward Woo. "They've gained market share and they're likely to continue to maintain that momentum into the holiday season."
The shares had been up more than five percent, but they gave back some of their gains because they are getting close to their fair value, said MKM Partners analyst Eric Handler, whose price target is $28.
Now the question is whether the shares will keep rising in the run-up to the holidays.
Woo thinks that could happen and his price target is under review. The company is in a position to grow earnings by at least 10 percent on a revenue increase in the mid to high single digits, he said.
"Barbie is getting big internationally," said Handler. "The whole company has become more internationally focused."
The maker of Hot Wheels cars and Fisher-Price toys said second-quarter net profit rose to $80.5 million, or 23 cents per share, from with $51.6 million, 14 cents per share, last year.
U.S. toy companies, which make most of their toys in China, are grappling with rising costs of plastics, packaging paper, freight and labor. Mattel's gross margins fell 20 basis points.
"Costs have been rising, but it's manageable for them," Woo said.
Analysts on average expected earnings of 16 cents a share, on sales $1.11 billion, according to Thomson Reuters I/B/E/S.
The company's shares were up nearly 2 percent at $27.29 in midday trading. They have risen 6.3 percent so far in 2011. They trade at about 13.1 times forward earnings, well above the sector average of 7.9. Rival Hasbro Inc's (HAS.O) shares trade at a multiple of about 13.9. (Additional reporting by Dhanya Skariachan and Nivedita Bhattacharjee in Bangalore; editing by Maju Samuel, Steve Orlofsky and Andre Grenon)