Callaway Golf's Impressive Market Share Gains Tempered By Modest Guidance

Callaway Golf Co ELY announced its 2017 guidance short of expectations. Given that the company continued to gain market share across product categories and positive channel checks for new 2017 products, management’s guidance could prove conservative, Wunderlich’s Rommel Dionisio said in a report.

Dionisio maintains a Buy rating on the company, while reducing the price target from $15 to $13 to reflect lower 2017 estimates for the core golf business. The EPS estimate for 2017 has been reduced from $0.39 to $0.27.

Q4 Results

Callaway Golf reported its quarterly revenue at $164 million, short of the consensus expectation of $171 million. EPS came in at $(0.18), below the consensus estimate of $(0.17). “Solid market share expansion across product categories and geographies were partially offset by softer-than-expected industry conditions overall, particularly in Asia,” Dionisio wrote.

2017 Guidance

Management guided to revenue of $910 million–$935 million and pro forma EPS of $0.21–$0.27, below the consensus forecasts of $935 million and $0.34, respectively. The EPS guidance includes a higher impact from foreign currency and dilution from the OGIO acquisition.

Positive Channel Checks

Checks indicate that Callaway Golf’s major driver launch this year, the Great Big Bertha Epic, “is slated to be the hot new product for 2017 for the entire industry,” the analyst noted. He added, “Should this pre-season buzz play out in the consumer marketplace this year, sales of this premium price point product could very well drive potential upside to management guidance and estimates for 2017.”

At last check, shares of Callaway were down 7.6 percent at $10.15.