ELY Stock Wavers

2009-07-19

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Callaway Golf Company (NYSE: ELY) finished at $5.06 per share on Friday after trading as high as $5.48 per share. The company on July 16 released second quarter preliminary results that said it will earn 10 cents per share for the quarter, down from 58 cents per share for the same quarter of 2008. Wall Street analysts expected the company to earn 12 cents per share on revenue of $296.6 million for the quarter.
 
ELY said its preliminary results show its Q2 per share profit fell sharply on weaker sales, which prompted the company to lower its guidance for the rest of the year. Callaway, which has struggled with its core metal woods business the past few quarters, will release its complete financial results on July 29. That could set up an interesting showdown between Callaway CEO George Fellows and Wall Street analysts.
 
In the Q2 preliminary statement, Callaway said it expects to report total sales decreased 17 percent to $302 million.
 
“Consumer spending is recovering more slowly than we had anticipated and market conditions remained soft in the second quarter of 2009 in both the United States and internationally,” Fellows said. "Despite this challenging environment, we were able to outperform the market and gain market share in almost all categories, which is a testament to the strength of our brands and our products. We also reduced our operating expenses in the second quarter by approximately 10 percent and we raised $140 million through a preferred stock offering. The additional capital allowed us to remain in compliance with our credit facility and will provide us with the operational and financial flexibility to manage our business through 2010.”

As a result, Callaway said it no longer expects earnings for the second half of the year to outperform last year. The company also said it expects sales will drop 15 to 17 percent for the full year, which would result in sales of $927.3 to $949.6 million.

Analysts expect the company to report a loss of two cents per share for the year on revenue of $937.4 million for the year.

The company also adjusted its operating expenses and lowered its gross margin estimates to 38 to 40 percent, compared with the previous estimate of 40 to 42 percent.