FBR Capital Reiterates Outperform on Callaway Golf (ELY) Following 3Q Beat
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FBR Capital reiterated an Outperform rating and $12.00 price target on Callaway Golf (NYSE: ELY) following the company's 3Q earnings report. ELY reported a 3Q16 EPS beat of ($0.06) versus consensus of ($0.12). The results reflect revenue growth of +6.9% versus consensus of +0.1%. The revenue beat was driven by the Japan apparel joint venture, golf balls (+11.6% versus consensus of +0.1%), and irons (+18.4% versus consensus of +0.1%).
Analyst Susan Anderson commented, "Callaway reported a 3Q16 EPS beat of ($0.06) versus FBR/consensus of ($0.12), reflecting better-than-expected sales of $187.9M (+6.9% versus FBR/consensus of +2.5%/+0.1%), GM de-leverage of –210 bps, and operating expense de-leverage of –108 bps. In 3Q, GM was down –216 bps driven by product launch timing, resulting in sales of higher-margin product in 3Q15 versus 3Q16. However, GM is up +110 bps YTD, and ELY still expects ~200 bps of GM expansion for 2016. We view these improvements as positive steps toward ELY's long-term EBIT margin goal of 7% to 8%. We continue to like ELY and believe it is poised for significant growth and margin expansion over the next few years, driven by (1) continued market share gains; (2) greater scale driving leverage in its highly variable cost structure; (3) acquisition opportunities now that ELY has no debt; (4) supply-chain efficiencies; and (5) its minority stake in Topgolf, which is rapidly growing; and (6) golf consolidation."
Shares of Callaway Golf closed at $9.87 yesterday.
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