3 Reasons Wunderlich Upgraded Callway Golf To Buy

Proprietary channel checks have indicated a positive pricing environment, a moderate promotional landscape and market share gains for Callaway Golf Co ELY, Wunderlich’s Rommel Dionisio said. The analyst upgraded the rating for the company from Hold to Buy, while raising their price target from $10 to $12.

#1: Positive Pricing Environment

After more than a decade of flat pricing, retailers indicated major price increases across various club categories, which boosts Callaway’s gross margin. “Callaway has been at the forefront of driving such price increases at retail, which have successfully stuck,” analyst Rommel Dionisio wrote.

#2: Promotional Landscape

Retailers indicated that promotions by competitors had been more moderate for this time of year than what had been witnessed for over three years. There had been no discounting on major new 2016 models of woods and irons, “an unusually positive factor for late-May,” Dionisio commented, while adding, “Retailers noted rounds played has been positive y/ y, customer traffic in stores strong, and overall inventory levels manageable.”

#3: Market Share Gains

Callaway continues to record market share gains in clubs. The XR16 driver, the Apex series of irons and the Chrome Soft balls had been the company’s bestselling new products so far this season. “Callaway is now staggering its product launch timing more so than in prior years, so we await additional major introductions later this year,” the analyst wrote.

Estimates Raised

The revenue estimates for 2016 and 2017 have been raised from $865mm to $873mm, and from $908mm to $916mm, respectively. The EPS forecasts for 2016 and 2017 have been raised from $0.46 to $0.48 and from $0.40 to $0.42, respectively.