Market Pulse

Callaway Golf shares drop after weak guidance for new acquisition

Callaway Golf Co. ely+1.71% shares fell 5.8% in Friday trading after the company gave weak sales guidance for its newly-acquired outdoor apparel acquisition. Net income totaled $48.6 million, or 50 cents per share, down from $62.9 million, or 65 cents per share. Adjusted EPS was 63 cents. Sales totaled $516.2 million, up from $403.2 million in 2018. The FactSet consensus was for EPS of 47 cents and sales of $504.0 million. Results were impacted by the Jack Wolfskin acquisition in January 2019, which contributed $93 million in sales. For 2019 the company expects adjusted EPS of 96 cents to $1.06. The FactSet consensus is for 95 cents per share. The company reiterated its sales guidance for 34% to 37% growth, but expects Jack Wolfskin's full-year sales growth of 4% to 6%, lower than the previous estimate for $382 million. "Given the strong 2019 first quarter growth in the company's other golf equipment, apparel and accessories businesses, the company anticipates that growth in those other businesses will offset the expected lower sales in the Jack Wolfskin business," Callaway said. "While we remain confident with management's ability to continue to grow market share and earnings in the core golf category, we are increasingly concerned with the potential from the recent Jack Wolfskin acquisition," wrote Raymond James. Analysts highlight the "elevated risks" that come with expanding beyond that core business. Raymond James rates Callaway shares market perform. Callaway stock has gained 5.2% for the year to date while the S&P 500 index spx+0.84% is up 13.5% for the period.

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