Callaway Golf Earnings Preview

Callaway Golf (NYSE: ELY  ) hasn't been able to establish an earnings trend, bouncing between beating and falling short of estimates during the past fiscal year. The company will unveil its latest earnings on Thursday. Callaway Golf, together with its subsidiaries, designs, manufactures, and sells golf clubs and golf balls.

What analysts say:

• Buy, sell, or hold?: Analysts think investors should stand pat on Callaway Golf with six of 11 analysts rating it hold. Analysts like Callaway Golf better than competitor Johnson Outdoors overall. Zero out of one analysts rate Johnson Outdoors a buy compared to five of 11 for Callaway Golf. Analysts still rate the stock a hold, but they are a bit more wary about it compared to three months ago.
• Revenue forecasts: On average, analysts predict $174.5 million in revenue this quarter. That would represent a decline of 0.6% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is a loss of $0.24 per share. Estimates range from a loss of $0.34 to a loss of $0.13.

What our community says:
CAPS All-Stars are solidly behind the stock with 89.5% giving it an outperform rating. The community at large backs the All-Stars with 84% awarding it a rating of outperform. Fools are keen on Callaway Golf and haven't been shy with their opinions lately, logging 138 posts in the past 30 days. Despite the majority sentiment in favor of Callaway Golf, the stock has a middling CAPS rating of three out of five stars.

Management:
Revenue has fallen for the past three quarters. The company's gross margin shrank by 3.2 percentage points in the last quarter. Revenue fell 9.8% while cost of sales fell 4.9% to $171.2 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q2	Q1	Q4	Q3
Gross Margin	37.5%	43.3%	29.9%	27.9%
Operating Margin	(3.7%)	8.0%	(22.7%)	(21.6%)
Net Margin	(23.2%)	4.5%	(17.4%)	(10.4%)

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