Golf World Still Under Par (ELY, GOLF, ADGF, DKS, PERY)

Callaway reported EPS of $0.18 versus a consensus estimate of $0.21 on revenue of $285.1 million compared with an estimate of $312.1 million. The company slashed its first half sales forecast from $610-$630 million to $560-$575 million, cut its estimate of gross margin by one point to 43%, and lowered its first half EPS estimate to $0.20-$0.25. That last figure means that second quarter EPS is expected to come in at less than half the first quarter amount.

Callaway stock is taking a beating today, down -15% at $5.93 in a 52-week range of $4.70-$7.29 on 4x average daily volume. Golfsmith, which is expected to post an EPS loss of -$0.13 when it reports first quarter results, is also down about -0.9% at $4.60 in a 52-week range of $2.44-$5.26. Golfsmith trades just under 6,200 shares/day and has a market cap of about $73 million. If Callaway were doing better, there could be an opportunity for more consolidation in the golf world.

Paul Ausick