Golf equipment and apparel company Acushnet (NYSE:GOLF) missed analysts' expectations in Q4 FY2023, with revenue down 7.7% year on year to $413 million. On the other hand, the company's full-year revenue guidance of $2.48 billion at the midpoint came in slightly above analysts' estimates. It made a GAAP loss of $0.41 per share, down from its profit of $0.05 per share in the same quarter last year.
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Acushnet (GOLF) Q4 FY2023 Highlights:
- Revenue: $413 million vs analyst estimates of $429.2 million (3.8% miss)
- EPS: -$0.41 vs analyst expectations of -$0.37 (11.9% miss)
- Management's revenue guidance for the upcoming financial year 2024 is $2.48 billion at the midpoint, beating analyst estimates by 0.8% and implying 3.9% growth (vs 4.1% in FY2023)
- Free Cash Flow of $41.97 million, down 74.1% from the previous quarter
- Gross Margin (GAAP): 50.8%, up from 50% in the same quarter last year
- Market Capitalization: $4.52 billion
Leisure ProductsLeisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Acushnet's annualized revenue growth rate of 7.8% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Acushnet's recent history shows the business has slowed as its annualized revenue growth of 5.3% over the last two years is below its five-year trend.
This quarter, Acushnet missed Wall Street's estimates and reported a rather uninspiring 7.7% year-on-year revenue decline, generating $413 million of revenue. Looking ahead, Wall Street expects sales to grow 2.9% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, Acushnet has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 3.6%, subpar for a consumer discretionary business.
Acushnet's free cash flow came in at $41.97 million in Q4, equivalent to a 10.2% margin. This result was great for the business as it flipped from cash flow negative in the same quarter last year to cash flow positive this quarter. Over the next year, analysts predict Acushnet's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 12.4% will decrease to 9.1%.
Key Takeaways from Acushnet's Q4 Results It was good to see Acushnet's full-year revenue forecast beat analysts' expectations. On the other hand, its revenue, operating margin, and EPS fell short of Wall Street's estimates - each of its product segments (clubs, gear, FootJoy) saw revenue contract except for Titleist Golf Balls (its largest segment), which grew 5.4% year on year. Overall, the results could have been better. The stock is flat after reporting and currently trades at $69 per share.