Acushnet Analysts Dissect Q1 Shank, Question Street Expectations

Acushnet Holdings GOLF shares were recovering Thursday after a rough first-quarter report. 

The Titleist golf ball maker reported earnings per share of 46 cents against a 55-cent consensus estimate and sales of $433.702 million, missing the consensus estimate by $11.75 million.

KeyBanc: 'It's Still Early In The Season' 

Acushnet's mixed results were due to an underappreciation in estimates of the difficult compares in the club segment, which saw a 21.9-percent decline, KeyBanc Capital Markets analyst Brett Andress said in a Wednesday note. 

It was partially offset by better-than-expected golf ball sales, which grew 13.4 percent, the analyst said. 

Andress said he continues to view the long-term story favorably.

“While we tweak estimates lower to reflect 1Q19’s delta, it’s still early in the season, and we find comfort in a slightly better than expected industry backdrop, both domestically and internationally." 

KeyBanc reiterated an Overweight rating on Acushnet and lowered the price target from $28 to $27. 

Wells Fargo Stays Neutral 

While Acushnet reaffirmed full-year guidance, investor skepticism is likely heightened, meaning that Acushnet needs to deliver in the second quarter, Wells Fargo analyst Timothy Conder said in a Wednesday note. 

Titleist’s leading premium position focused on the dedicated golfer should generate outperformance within a golf market growing slowly at 1-2-percent annually, the analyst said.  

“We believe that GOLF can outperform the industry by concentrating on the 6-7MM dedicated golfer population, which accounts for 15 percent of U.S. golfers, 40% of U.S. rounds played, and 70% of U.S. equipment/wear/gear dollar spend." 

Global rounds played, one of the most critical metrics to gauge the state of golf, are expected to be flat, according to Acushnet management, Conder said. 

Wells Fargo maintained a Market Perform rating with a $25 price target.

Morgan Stanley Says Expectations Were Misplaced 

After digging deeper, Morgan Stanley's Kimberly Greenberger said she sees several encouraging signs in the first-quarter print and wonders if the error may have laid with external expectations rather than fundamental performance.

“During 4Q18's earnings call, GOLF indicated the same - that quarterly results would highly fluctuate due to product launches ("a big theme here in 2019 is our launch cadence"), but when management offered 2019 guidance it chose to focus on the 1H vs.2H cadence rather than 1Q vs.2Q," the analyst said.

"The ‘1Q miss’ strikes us as (MS/consensus) mis-modeling, not soft fundamentals." 

Second-quarter and third-quarter product launches, as well as easier comparisons, should drive sales acceleration and improved margin trends, Greenberger said. 

Morgan Stanley maintains an Overweight rating with a $27 price target.

Price Action 

Acushnet shares were up 2.7 percent at $24.70 at the time of publication Thursday. 

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