New Pro V1 And Pro V1x Launches And Supply Chain Improvements Will Strengthen Future Prospects

Key Takeaways

• New product launches and strategic investments in global networks are expected to drive sales and create growth opportunities, enhancing revenue and margins.
  
• Transitioning manufacturing and implementing an ERP system should boost supply chain durability and operating efficiencies, improving cost management and profitability.
  
• Substantial investments and international challenges may increase costs and pressure margins, while currency and competitive pricing present additional risks to revenue growth.

Catalysts

Designs, develops, manufactures, and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally.

• The company expects to benefit from new product launches, such as the Pro V1 and Pro V1x golf balls and new Titleist club lines, projecting increased sales across all regions, which should positively impact revenue.
  
• Strategic investments in global fitting networks for golf equipment and footwear, along with the expansion of B2B and D2C capabilities, are expected to create long-term growth opportunities and leverage operating margins.
  
• The transition of footwear manufacturing from China to Vietnam is expected to lead to greater product development capabilities and a more durable supply chain, likely improving cost of goods sold and net margins.
  
• Implementation of a new global ERP system is anticipated to streamline operations, enhance supply chain management, and improve financial processes, which could improve operating efficiencies and bolster net margins.
  
• A strategic focus on higher-margin product offerings and pricing actions, particularly within the FootJoy segment, is expected to safeguard profitability, which could enhance net margins and earnings.

Acushnet Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Acushnet Holdings's revenue will grow by 2.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 8.7% today to 8.4% in 3 years time.
• Analysts expect earnings to reach $222.7 million (and earnings per share of $3.91) by about April 2028, up from $214.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, up from 18.3x today. This future PE is greater than the current PE for the US Leisure industry at 18.7x.
• Analysts expect the number of shares outstanding to decline by 4.98% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.6%, as per the Simply Wall St company report.

Acushnet Holdings Future Earnings Per Share Growth

Risks

• Acushnet has made substantial investments such as a multi-year ERP implementation and global fitting network expansion, which could result in significant SG&A cost increases, possibly impacting net margins negatively in the short term.
  
• The macroeconomic backdrop in key international markets like Korea and Japan remains challenging, potentially affecting revenue growth outside the U.S.
  
• The complex tariff and trade environment, especially concerning China, poses a potential risk that could increase costs and negatively affect net margins if not effectively mitigated.
  
• Despite strong growth prospects in the golf ball segment, there is potential pressure from competitive pricing and promotional activities in Q2 and Q3, which could impact revenues and gross margins.
  
• The company faces potential foreign currency headwinds that could negatively impact revenue and adjusted EBITDA if currency conditions worsen or are not appropriately hedged.

Valuation

• The analysts have a consensus price target of $69.286 for Acushnet Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $64.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $222.7 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 6.6%.
• Given the current share price of $65.32, the analyst price target of $69.29 is 5.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.