Shares of golf-products maker Callaway Golf (MODG -1.99%) tumbled 9% through 3:30 p.m. Friday after reporting a loss -- but a smaller-than-expected loss -- for its fiscal fourth quarter 2021 last night.
Heading into the quarter, analysts had forecast that Callaway would lose $0.28 per share on sales of $703 million in Q4 2021. Instead, Callaway says it lost only $0.19 per share, and its sales were $712 million -- so "beats" on both the top and bottom lines.
Sales jumped 90% year over year, and the company did lose money. (Winter isn't exactly a prime season for the outdoor sport of golf.) But even so, its losses slimmed by 68% in comparison to last year's Q4, with Callaway reporting only a $0.14 per-share generally accepted accounting principles (GAAP) loss. (The $0.19 noted above was a non-GAAP number.)
So sales growth was incredible, and actual GAAP losses were better than pro forma losses, which in turn were better than Wall Street expectations. What's not to like about any of that?
Excellent question. Next question, please.
I jest, but seriously: Everything seemed to go swimmingly for Callaway last year. Full-year sales nearly doubled to $3.1 billion. 2020's GAAP losses were erased and replaced with a $1.82 per-share, full-year profit. As CEO Chip Brewer pointed out (yes, the golf company's CEO is named "Chip"), "this was a record year in many aspects."
Heck, even guidance was great at Callaway. Management is forecasting at least a 20% increase in sales this year, to roughly $3.8 billion. And while Callaway didn't give specific GAAP guidance for earnings, it did say that "adjusted EBITDA" will grow by 10% to 16%.
That sounds pretty propitious for earnings to me. My best guess as to why investors are selling Callaway stock today is simply because they seem to be selling everything, with the Dow down 1.5% and the Nasdaq falling 3%.
(But that doesn't make it a good reason to sell.)