FBR Capital Reiterates Outperform on Callaway Golf (ELY) Following 3Q Beat

November 4, 2016 7:45 AM EDT
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Price: $11.91 --0%

Rating Summary:
    10 Buy, 4 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 8 | Down: 4 | New: 1
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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."

For an analyst ratings summary and ratings history on Callaway Golf click here. For more ratings news on Callaway Golf click here.

Shares of Callaway Golf closed at $9.87 yesterday.



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