With shares up 14.5% in Friday trading, Callaway Golf Co. is headed toward a 17-year high after better-than-expected earnings driven by the Rogue line of golf clubs and a new line of balls.
The earnings drove price target increases from at least four equity analysts.
Callaway Golf ELY, +11.67% reported earnings of 63 cents per share, up from 33 cents last year and ahead of the 47-cents FactSet consensus. Sales totaled $396.3 million, up from $304.5 million last year, and ahead of the FactSet consensus of $371.0 million.
Callaway Golf raised its full-year guidance. It now expects sales of $1.210 billion to $1.225 billion, up from a prior range of $1.170 billion to $1.185 billion. And earnings per share are expected to range from 95 cents to $1, up from 77 cents to 82 cents previously. The FactSet consensus was for $1.185 billion for revenue and earnings of 82 cents per share.
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“Our new products, particularly the Rogue line of woods and irons, as well as our new Chrome Soft golf balls featuring Graphene are resonating on a global basis,” said Callaway Golf Chief Executive Oliver Brewer on the earnings call. “Our putter business is gaining strength through the year and our new business initiatives continue to perform at or above expectations.”
Cowen analysts led by John Kernan questioned the guidance after the announcement.
“The second half outlook looks conservative given momentum in golf balls and woods,” analysts said.
“Product cycle across woods, irons and golf balls continues to surprise the upside,” analysts wrote elsewhere in the note.
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In 2017, big athletic players like Adidas AG ADS, +2.30% and Nike Inc. NKE, +0.18% moved away from the golf business to focus on other sports. However, golf is attracting players.
“The golf equipment industry is a low-growth industry but rounds played, an indicator of the sport’s health, has increased in each of the last two years and the industry is in its healthiest inventory position in a decade,” Cowen wrote.
Cowen rates Callaway Golf shares at market perform and raised its price target to $21 from $18, calling the company “one of the most respected brands in the golf industry and a leader in clubs, balls, and bags sold.”
SunTrust Robinson Humphrey analysts raised their price target to $24 from $20 and maintained their buy stock rating.
“In our view, Callaway Golf is operating at a very high level and we expect this best-in-class earnings growth story to carry into 2019 (and beyond) as a result of improving market growth, product/share gains, operational efficiencies and synergies from recent acquisitions,” analysts said.
J.P. Morgan said Callaway Golf is poised to snag more share in golf balls.
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“With the market share leader Titleist in the midst of a new product introduction that poses a threat to its established ProV1 market share, we see Callaway as a beneficiary of market disruption and expect Callaway share gains to continue,” analysts wrote.
Titleist is an Acushnet Holdings Corp. GOLF, +4.06% brand.
J.P. Morgan rates Callaway Golf shares overweight and raised its price target to $25 price target from $23.
KeyBanc Capital Markets, raised its stock price target to $25 from $23.
Callaway Golf shares have rallied nearly 41% for 2018 so far, outpacing the S&P 500 index SPX, +0.19% which is up 5.8% for the period.