The 2019 PGA Tour playoffs are underway, and analysts had plenty to say about the golf industry on Friday.
Callaway Golf Co ELY reported a solid second-quarter earnings and sales beat Thursday that also saw the company announce a $100-million buyback plan.
The company also raised its adjusted EPS guidance from a range of 96 cents to $1.06 to a range of $1.03-$1.09.
KeyBanc analyst Brett Andress said the results came in solidly above heightened expectations of late, citing encouraging performance from the recently acquired company Jack Wolfskin, which saw $48 million in revenue.
Andress said List 4 tariffs are expected to have minimal impacts in 2019 and manageable impacts the following year.
Callaway now expects constant-currency revenue growth in the core to increase by 7-9%, the analyst said.
The domestic golf industry is showing "strong, early momentum into significantly easier compares" for the second half of 2019, he said.
This, as well as Callaway's back-half loaded cadence and international outperformance, point to upside to the company's expectations, Andress said.
Callaway is also making its way into the ultra-luxury golf equipment trend with the release of its Epic Forged Irons and Epic Flash Star family last week.
Andress said Callaway’s stake in fast-growing TopGolf now sits at $5.25 per share.
KeyBanc has an Overweight rating on Callaway with a $23 price target.
Wells Fargo Neutral On Acushnet
The story was a bit different for Acushnet Holdings Corp GOLF after the company reported a second-quarter earnings and sales miss Wednesday.
Wells Fargo analyst Timothy Conder said the first-half shortfall appears more related to external industry and rounds played trends than internal execution.
Wells Fargo continues to be cautious on the company’s valuation multiple, industry channel inventories near the high-end of the comfort range and year-to-date weakness in Japan, the analyst said.
The second-half outlook is more positive, with a strong new product slate including T-Series irons and FootJoy building upon the momentum of the recent intros of Pro V1 and TS metals, he said.
Overall, Conder said the recent industry consolidation of equipment manufacturers and retailers continues to provide a market share opportunity for leaders.
"Retailer consolidation creates short-term wholesale interruption, but sales eventually redistribute through other outlets. We believe that GOLF will expand its market lead as the industry right-sizes over time. After a period of retail transition, the industry is now operating at a new normalized base."
Wells Fargo maintained a Market Perform rating on Acushnet with a $25 price target.
Price Action
Callaway Golf shares were up 7.53% at $18.84 at the time of publication Friday, while Acushnet shares were trading higher by 0.88% at $25.14.
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Photo courtesy of Callaway.
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