Golf equipment maker Callaway Golf Co. (NYSE: ELY) reported first-quarter results this morning that missed expectations, but the worse news was that the company sharply lowered its guidance for the first half of 2012. Now that Adams Golf Inc. (NASDAQ: ADGF) has agreed to be acquired by adidas Group’s TaylorMade division, only Callaway and Golfsmith International Holdings Inc. (NASDAQ: GOLF) remain as independent suppliers of premium golf equipment. The Titleist brand was sold to Korea-based FILA last year, and Callaway recently sold its Top-Flite brand to Dick’s Sporting Goods Inc. (NYSE: DKS). Earlier this year the company sold its Ben Hogan brand to Perry Ellis International Inc. (NASDAQ: PERY).

Callaway reported EPS of $0.18 versus a consensus estimate of $0.21 on revenue of $285.1 million compared with an estimate of $312.1 million. The company slashed its first half sales forecast from $610-$630 million to $560-$575 million, cut its estimate of gross margin by one point to 43%, and lowered its first half EPS estimate to $0.20-$0.25. That last figure means that second quarter EPS is expected to come in at less than half the first quarter amount.

Callaway stock is taking a beating today, down -15% at $5.93 in a 52-week range of $4.70-$7.29 on 4x average daily volume. Golfsmith, which is expected to post an EPS loss of -$0.13 when it reports first quarter results, is also down about -0.9% at $4.60 in a 52-week range of $2.44-$5.26. Golfsmith trades just under 6,200 shares/day and has a market cap of about $73 million. If Callaway were doing better, there could be an opportunity for more consolidation in the golf world.

Paul Ausick

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