Can Callaway (CALY) Run Higher on Rising Earnings Estimates?

Investors might want to bet on Callaway Golf (CALY), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The upward trend in estimate revisions for this maker of golf equipment and accessories reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Callaway Golf, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.39 per share for the current quarter, which represents a year-over-year change of +254.6%.

The Zacks Consensus Estimate for Callaway has increased 33.63% over the last 30 days, as four estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $0.40 per share represents a change of +90.5% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Callaway. Over the past month, five estimates have moved higher compared to one negative revision, helping the consensus estimate increase 51.07%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Callaway currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Callaway shares have added 6.3% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

Zacks' Research Chief Picks Stock Most Likely to "At Least Double"

Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.

See Our Top Stock to Double (Plus 4 Runners Up) >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Callaway Golf Company (CALY): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research