GICS Sector : Consumer Cyclical
Topgolf Callaway Brands Corp.designs, manufactures, and sells golf equipment, golf and lifestyle apparel, and other accessories.It operates through three segments: Topgolf; Golf Equipment; and Apparel, Gear and Other.
In Q4, Callaway Golf's consolidated net sales reached $368 million, a 1% decline year-over-year, but still beat expectations. The company's golf equipment sales decreased by $11 million due to fewer product launches, while the soft goods segment saw a $7 million increase. The Q4 gross margin declined 220 basis points to 37.4% due to incremental tariffs. For the full year 2025, consolidated net sales were slightly down, primarily due to a 1.4% decrease in the soft goods segment. The actual EPS for the quarter came out at -$0.25, better than the estimated -$0.44.
Publication Date: Feb -22
Callaway Golf provided guidance for 2026, with revenue expected to be in the range of $1.98 billion to $2.05 billion and adjusted EBITDA in the range of $170 million to $195 million. The company expects to generate approximately $100 million of free cash flow in 2026. Analysts estimate next year's revenue growth at 14.3%, indicating a positive outlook for the company. The company's capital allocation priority is to reinvest in the business, maintain a healthy balance sheet, and return capital to shareholders through a $200 million stock purchase program.
The company is focusing on improving its margin profile through structural investments, including changing its product launch cadence and mix, reinvesting in fitting, and creating differentiated approaches. Callaway Golf has increased equipment gross margins by nearly 200 basis points last year, net of tariffs, and forecasts total company gross margins to be approximately flat this year despite $40 million of incremental tariffs. The company took select pricing to offset some of the tariff impact and aims to drive improvements in margins and strengthen the business over the long term.
With a P/S Ratio of 0.77 and an EV/EBITDA of 10.18, the company's valuation appears reasonable. The Dividend Yield stands at 8.36%, providing a relatively attractive return for investors. As the company continues to optimize its business and improve its margin profile, it is well-positioned for long-term growth. The company's net cash positive position and expected free cash flow generation in 2026 further support its prospects.
Topgolf Callaway Brands Corp. (NYSE:MODG) Receives Consensus Rating of “Hold” from Analysts
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Topgolf's 7% growth driven by increasing popularity of entertainment and experiential leisure activities, expansion into new markets, and strategic partnerships. Additionally, investments in technology and digital platforms enhance customer experience, while growing membership programs and corporate events contribute to revenue growth.
Topgolf Callaway Brands Corp.'s golf equipment segment growth is driven by increasing popularity of golf, expansion into new markets, strategic partnerships, and innovative product offerings. Additionally, the company's focus on digital marketing and e-commerce platforms has enhanced customer engagement, contributing to a 5% growth rate.
Topgolf's Active Lifestyle segment growth is driven by increasing demand for experiential entertainment, expansion into new markets, and strategic partnerships. The brand's unique blend of golf, food, and socializing resonates with millennials and Gen Z, fueling growth. Additionally, investments in digital platforms and loyalty programs enhance customer engagement, contributing to the segment's 4% growth.
Topgolf Callaway Brands Corp. offers a wide range of golf clubs, including drivers, fairways, hybrids, irons, wedges, and putters, designed for golfers of all skill levels.
Topgolf Callaway Brands Corp. manufactures high-quality golf balls designed for distance, accuracy, and control, suitable for golfers of all skill levels.
Topgolf Callaway Brands Corp. offers a range of apparel and accessories, including shirts, pants, hats, bags, and gloves, designed for comfort, style, and performance.
Topgolf Callaway Brands Corp. operates entertainment venues that combine golf, food, and fun, offering a unique social experience for players of all skill levels.
Topgolf Callaway Brands Corp. offers Toptracer, a ball-tracking technology that provides real-time data and analytics to help golfers improve their game.
Topgolf Callaway Brands Corp. faces moderate threat from substitutes, as customers have alternative options for entertainment and golfing experiences. However, the company's unique blend of technology, food, and beverage offerings helps to differentiate it from competitors.
Customers have limited bargaining power due to Topgolf Callaway Brands Corp.'s strong brand reputation and unique offerings. The company's focus on customer experience and loyalty programs also helps to reduce customer bargaining power.
Suppliers have limited bargaining power due to Topgolf Callaway Brands Corp.'s large scale of operations and diversified supply chain. The company's ability to negotiate prices and terms with suppliers also reduces supplier bargaining power.
The threat of new entrants is low due to the high barriers to entry in the golf and entertainment industry. Topgolf Callaway Brands Corp.'s established brand and significant investments in technology and infrastructure make it difficult for new entrants to compete.
The intensity of rivalry in the golf and entertainment industry is moderate, with several established players competing for market share. However, Topgolf Callaway Brands Corp.'s unique offerings and strong brand reputation help to differentiate it from competitors and reduce the intensity of rivalry.
| Value | |
|---|---|
| Debt Weight | 29.98% |
| Debt Cost | 3.95% |
| Equity Weight | 70.02% |
| Equity Cost | 13.13% |
| WACC | 10.37% |
| Leverage | 42.82% |
Value: 5.7
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Yield: 8.0
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