Topgolf Callaway Brands Corp. MODG is scheduled to report results for the third quarter of 2024 on Nov. 12, after market close. In the last reported quarter, earnings topped the Zacks Consensus Estimate by 50% and increased 7.7% on a year-over-year basis,

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Notably, the company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 235.9%.

Trend in Estimate Revision of MODG

The Zacks Consensus Estimate for loss has widened by a cent to 18 cents per share in the past 60 days. The company reported adjusted earnings per share (EPS) of 20 cents in the year-ago quarter.

The consensus mark for revenues is pegged at $981.3 million, implying a decrease of 5.7% from the year-ago quarter’s reported figure.

Factors to Shape Topgolf Callaway’s Quarterly Results

Topgolf Callaway's third-quarter 2024 revenues and earnings are expected to have declined year over year due to slowing consumer activity and macroeconomic challenges. These include the cumulative impact of negative foreign exchange trends, persistently high inflation and lower-than-expected same-venue sales at Topgolf. These factors are likely to have hurt MODG’s performance in the quarter to be reported.

For third-quarter 2024, MODG expects consolidated revenues in the range of $970-$990 million, down from $1,041 million reported in the year-ago quarter.

Meanwhile, increased marketing expenses for new product launches and higher airfreight costs are likely to have hurt MODG’s bottom line in the quarter to be reported. The company expects adjusted EBITDA in the range of $95-$105 million, down from $163 million reported in the year-ago quarter. This decline is likely to have been driven by revenue deleverage, higher marketing expenses and increased hedge losses compared with the prior year.

Segment-wise, the company expects Topgolf (which accounted for 42.7% of second-quarter total revenues) to see a low single-digit decline in revenues for the third quarter. Operating income is likely to be down more than revenues due to revenue deleverage and changes in the timing of marketing expenses. However, continued efficiencies are expected to have partially offset this. Same-venue sales are expected to have remained roughly the same in the third quarter.

Golf equipment (accounted for 35.7% of second-quarter total revenues) sales are expected to be down slightly, primarily due to unfavorable changes in foreign currency. Operating income is anticipated to have declined due to the revenue decrease and higher marketing spending related to new product launches.

Revenues in the Active Lifestyle (accounted for 21.6% of second-quarter total revenues) segment are expected to have declined year over year due to lower sales estimates for Jack Wolfskin and the Europe wholesale channel. Operating income is anticipated to have declined due to the revenue decrease.

The Zacks Consensus Estimate for revenues from the Active Lifestyle segment in the to-be-reported quarter is pegged at $271 million, indicating a year-over-year decline of 9.5%. The Zacks Consensus Estimate for the segment’s operating income is pegged at $20.15 million, down from $40 million reported in the year-ago quarter.

The Zacks Consensus Estimate for the operating income from Topgolf and Golf equipment segment is pegged at $11.51 million and $28.32 million, down from $38.9 million and $35.2 million reported in the year-ago quarter, respectively.

However, MODG is likely to have benefited from increased digital sales penetration and strong market share performance at Travis Mathew and Callaway Golf Equipment. Also, the emphasis on expansion through organic and inorganic options is likely to have aided its performance in the to-be-reported quarter.

The Zacks Consensus Estimate for revenues from Topgolf and Golf equipment segment is pegged at $464 million and $299 million, indicating year-over-year growth of 3.6% and 1.9%, respectively.

Also, continued improvement in venue operating efficiencies and cost-saving initiatives are expected to have aided its third-quarter’s bottom-line performance.

What the Zacks Model Unveils for MODG

Our proven model does not conclusively predict an earnings beat for Topgolf Callaway this time around. The company does not have the right combination of the two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), to increase the odds of an earnings beat.

Earnings ESP of MODG: MODG has an Earnings ESP of 0.00% at present. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

MODG’s Zacks Rank: The company currently carries a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some stocks from the Zacks Consumer Discretionary space that investors may consider, as our model shows that these have the right combination of elements to beat estimates this time around. 

Bowlero Corp. BOWL has an Earnings ESP of +3.00% and a Zacks Rank of 3 at present. 

BOWL’s earnings for the to-be-reported quarter are expected to increase 1100% from the prior-year reported level. It posted earnings beat in one of the trailing four quarters and missed on the other three occasions, with an average negative surprise of 119.4%. 

Norwegian Cruise Line Holdings Ltd. NCLH currently has an Earnings ESP of +3.28% and a Zacks Rank of 2. 

NCLH’s earnings for the to-be-reported quarter are expected to increase 150% from the prior-year reported level. It posted earnings beat in three of the trailing four quarters and missed on one occasion, with an average surprise of 4.2%.

OneSpaWorld Holdings Limited OSW has an Earnings ESP of +1.21% and has a Zacks Rank of 2 at present. 

OSW’s earnings for the to-be-reported quarter are expected to increase 75% from the prior-year reported level. It posted earnings beat in two of the trailing four quarters, met on one occasion and missed once, with an average negative surprise of 1.2%.

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