Callaway Golf Company (NYSE:ELY) just released its third-quarter report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$476m, some 5.5% above estimates, and statutory earnings per share (EPS) coming in at US$0.54, 61% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Callaway Golf's nine analysts are now forecasting revenues of US$1.72b in 2021. This would be a meaningful 13% improvement in sales compared to the last 12 months. Callaway Golf is also expected to turn profitable, with statutory earnings of US$0.92 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.70b and earnings per share (EPS) of US$0.89 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of US$23.39, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Callaway Golf at US$27.00 per share, while the most bearish prices it at US$22.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Callaway Golf's revenue growth is expected to slow, with forecast 13% increase next year well below the historical 16%p.a. growth over the last five years. Compare this to the 49 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 14% per year. Factoring in the forecast slowdown in growth, it looks like Callaway Golf is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Callaway Golf's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$23.39, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Callaway Golf going out to 2024, and you can see them free on our platform here.
Even so, be aware that Callaway Golf is showing 1 warning sign in our investment analysis , you should know about...
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