Callaway Offers Good Spin

2009-12-02

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By Steve Pike

Callaway Golf Co. (NYSE: ELY) continues to try to put a good spin on bad financials. The company, which lost $16 million in the third quarter, recently hosted a conference call with Wall Street analysts in which management revised its long term operating targets to reflect what it said are the realities of the market and lower starting point. That's quite a feat given the fact that the best meteorologists can't accurately predict next week's weather, but such is life as a publicly traded company.

Callaway revised its operating margin goal to 13-17 percent from 15-17 percent, which translates into about $1 per share in earnings in 2012 versus the prior model that pointed to $2 per share. In other words, Callaway management believes there are still challenging times ahead for the company as well as the golf industry as a whole.

Callaway revised its revenue growth targets to between four and seven percent from three to five percent and said it is accelerating its investments, primarily in Latin America, to coincide with the golf in the 2016 Rio Olympics. Hoping that golf in the Olympics more than six years from now will help grow your business in the next two to three years is pie-in-the-sky to say the least, especially  because Callaway management hasn't shown any ability to stop its downward spiral. But rest-assured Callaway isn't the only equipment company thinking in those terms. Such is the fragile nature of the golf equipment industry these days.