Callaway Golf Co.
Tuesday’s close: $6.64 (U.S.) a share, down 1 cent
52-week trading range: $5.17 - $7.29 a share
Annual dividend: 4 cents a share for a yield of 0.6 per cent
Analysts’ ratings: There were six buys, two holds and one sell, according to Bloomberg data. Target prices range from $6.50 to $9 a share.
Recent history: Shares of the U.S.-based golf-gear maker are still down 75 per cent from a 2007 high of about $27 a share, and have been treading water in recent years as sales continued to slump. But its stock gained nearly 15 per cent over the past 12 months amid turnaround prospects with industry veteran Chip Brewer appointed chief executive officer last February. The company, which was founded by Ely Callaway in the early 1980s, has been cutting costs and sold off non-core businesses last year, including its Ben Hogan golf club and Top-Flite golf ball brands.
Outlook: Callaway was once the world’s largest golf-equipment maker, but it is now only one of the leading sellers in this game, said Norman Levine, managing director of Portfolio Management Corp., who bought Callaway shares last month. “When Ely Callaway died, professional managers came in and basically messed up the company. They came out with products that didn’t resonate with the public, and you’ve also had bad economic times. Mostly, they were hurt by poor production, and overcapacity in golf-ball manufacturing.”
But Callaway’s stock has some new catalysts, including the appointment of Mr. Brewer who helped turn around Adams Golf Inc., before it was sold last year to adidas AG’s TaylorMade unit. “They have brought in a new CEO with industry experience,” said Mr. Levine. They are fixing up the balance sheet because it had some very expensive debt... They also reduced their golf-ball manufacturing capacity, and sold off its unprofitable Top-Flite brand.”
Callaway is in the process of introducing fresh products, and signing new tour pros, including last week’s deal with Ryo Ishikawa of Japan. “We think that it’s a turnaround story, but there is also good value here,” said Mr. Levine. “They haven’t reported their December quarter yet, but their September quarter was the first in two years where they reported positive sales growth.”
Callaway will introduce two new lines of golf clubs at the PGA Merchandise Show beginning Jan. 24 in Orlando, Fla., but that will be “just the tease,” he said. “What will get investors really excited about the stock is when sales and earnings start to pick up... It’s early, but we think they are doing the right things.”