Golf club maker, Callaway Golf Inc. is set to enhance its presence in the golf club category. As part of this strategy, the company completed its takeover of golf bag maker, OGIO International, Inc., for an all cash transaction of $75.5 million. The acquisition expands Callaway’s presence in the golf industry, while providing a scope for the company to step into the lifestyle category.
Management notes that there is significant overlap in the two companies’ supply chains and go-to-market strategies. Further, the buyout allows the company to add value to its existing portfolio and simultaneously create profitable growth.
This deal is in harmony with the company’s ongoing strategy to discover revenue growth platforms through acquisitions that are tangentially related to its core business. Other recent investments include the acquisition of Toulon Design and the creation of a joint venture with TSI Groove for Callaway’s apparel brand in Japan.
OGIO is anticipated to be accretive to Callaway’s earnings immediately after it gets integrated to Callaway’s business. In 2017, the takeover is expected to contribute 2 cents to the company’s earnings. Further, the takeover is expected to contribute $45 millions to the company’s revenue in 2017.
Callaway stated that it financed the transaction with cash on hand and existing asset-backed credit facilities. While Lazard and Latham & Watkins acted as financial advisors and outside counsel to Callaway, Robert W. Baird & Company was the financial advisor to OGIO.
Callaway Golf has reported decent earnings performance in the past four quarters. The company has surpassed earnings estimates for the trailing four quarters with an average positive surprise of 17.8%. Callaway is expected to post a loss of 17 cents in the fourth quarter, narrower than a loss of 33 cents posted a year ago. The company is anticipated to post earnings of 53 cents, much better than 17 cents posted a year ago. The company’s share price gained 7% in the past six months, outperforming the Zacks categorized Leisure & Recreation Product industry which gained 0.4% during the same period.
Zacks Rank & Stock Picks
Callaway currently carries a Zacks Rank #3 (Hold)
Some better-ranked stocks in the broader consumer discretionary sector are Tailored brands Inc. , Francesca’s Holdings Corporation and Perry Ellis International Inc. .
Both, Tailored Brands and Francesca’s Holdings sports a Zacks Rank #1 (Strong Buy) and has an expected earnings growth of 17.5% and 13.8%, respectively. While Perry Ellis carries a Zacks Rank #2 (Buy). The company has an average earnings surprise of 19.5% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
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Callaway Golf Buys OGIO, Expands Golf Accessory Business
Golf club maker, Callaway Golf Inc. is set to enhance its presence in the golf club category. As part of this strategy, the company completed its takeover of golf bag maker, OGIO International, Inc., for an all cash transaction of $75.5 million. The acquisition expands Callaway’s presence in the golf industry, while providing a scope for the company to step into the lifestyle category.
Management notes that there is significant overlap in the two companies’ supply chains and go-to-market strategies. Further, the buyout allows the company to add value to its existing portfolio and simultaneously create profitable growth.
This deal is in harmony with the company’s ongoing strategy to discover revenue growth platforms through acquisitions that are tangentially related to its core business. Other recent investments include the acquisition of Toulon Design and the creation of a joint venture with TSI Groove for Callaway’s apparel brand in Japan.
OGIO is anticipated to be accretive to Callaway’s earnings immediately after it gets integrated to Callaway’s business. In 2017, the takeover is expected to contribute 2 cents to the company’s earnings. Further, the takeover is expected to contribute $45 millions to the company’s revenue in 2017.
Callaway stated that it financed the transaction with cash on hand and existing asset-backed credit facilities. While Lazard and Latham & Watkins acted as financial advisors and outside counsel to Callaway, Robert W. Baird & Company was the financial advisor to OGIO.
Callaway Golf has reported decent earnings performance in the past four quarters. The company has surpassed earnings estimates for the trailing four quarters with an average positive surprise of 17.8%. Callaway is expected to post a loss of 17 cents in the fourth quarter, narrower than a loss of 33 cents posted a year ago. The company is anticipated to post earnings of 53 cents, much better than 17 cents posted a year ago. The company’s share price gained 7% in the past six months, outperforming the Zacks categorized Leisure & Recreation Product industry which gained 0.4% during the same period.
Zacks Rank & Stock Picks
Callaway currently carries a Zacks Rank #3 (Hold)
Some better-ranked stocks in the broader consumer discretionary sector are Tailored brands Inc. , Francesca’s Holdings Corporation and Perry Ellis International Inc. .
Both, Tailored Brands and Francesca’s Holdings sports a Zacks Rank #1 (Strong Buy) and has an expected earnings growth of 17.5% and 13.8%, respectively. While Perry Ellis carries a Zacks Rank #2 (Buy). The company has an average earnings surprise of 19.5% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>