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Big Bertha may soon have some company at the driving range.

Callaway Golf

(ELY:NYSE) plans to introduce a new set of irons with a titanium component some time in the first half of 1997, perhaps as soon as the end of this month, according to sources close to company management. And if the past is any guide, a new set of clubs could prove a boon for Callaway stock investors.

The company declined to confirm or deny that it is close to introducing a new set of irons.

Five industry followers told

The Street

they anticipate an announcement to be forthcoming at the

PGA Merchandise Show

in Orlando from January 24-27. Callaway has made big announcements at the well-attended conference in the past. In 1995, for example, the company unveiled its top-selling line of Great Big Bertha titanium-head woods. (And keep an eye out for the company's fourth quarter earnings report, expected to be released Jan. 23.)

The launch of a new set of premium irons to complement its Great Big Bertha drivers and fairway woods is expected to give a nice boost to Callaway's stock, which has dropped from an all-time high of 36 5/8 in October to 29 1/8 midday today.

There should be some "positive reaction" in the stock if and when the company makes the announcement, says Robert C. Marvin, an analyst with

The Seidler Companies

, who has the stock rated a buy. The Seidler Companies have not done any underwriting for Callaway.

Historically, new product launches have been a major catalyst for Callaway's fantastic growth--its stock has increased almost 1,200% since its February 1992 IPO at a split-adjusted price of 2 1/2. And over the past six years, the company has introduced 23 new club models.

To be sure, Callaway plays in a more competitive field these days than it did in the past.

Tommy Armour Golf

TheStreet Recommends

,

Ray Cook Golf

and

Daiwa Corp.

have already launched sets of titanium irons.

And one industry follower remains skeptical that Callaway will be able to score a hole-in-one with a new line of titanium irons. "Are you going to get the same performance enhancement that you get in

titanium woods out of the irons?" asks Bud Leedom, the editor of

Golf Insight & Investing

.

Not all agree with Leedom. "They would never introduce a product that would not offer performance-enhancing features over their competitors or their own products," says Tim Conder, an analyst with

A.G. Edwards

, who reiterated a buy rating on the stock last week. A.G. Edwards has not done any underwriting for Callaway.

Another concern is that the sport's lack of growth--the number of golfers has been relatively constant at 24.5 million since 1991, according to the National Sporting Goods Association--will catch-up with the high-flying Carlsbad, Calif.-based company. Three analysts told

The Street

they expect the company to grow 15-20% annually for the next couple of years.

However, Seidler's Marvin says that the flat participation trend doesn't bother him, particularly since high-end golf club sales have been increasing close to 40% the past couple years. Avid golfers are willing to "spend more on golf clubs to improve their game," says Marvin.

At the same time, international sales offers significant growth potential. Callaway's direct international sales grew from 23% of overall revenue in 1992 to 34% in 1995. Conder expects that international revenues will reach 40% of revenue by 1998, as the company moves to acquire several distributors in Europe and the golf-crazed Pacific Rim.

Also longer term, the company has created a subsidiary to produce golf balls, starting in 1998 or 1999, to keep earnings growth momentum. With Callaway's distribution network and brand-name, they should be able to capture a sizable chunk of the $1.4 billion market, which has margins of around 63% as compared with Callaway's 52% margins, says Conder.

In the meantime, golfers desperate to improve their handicap are snapping up the $500 Great Big Bertha (also with titanium) drivers like there's no tomorrow. For the third quarter ended September 30, 1996, Callaway's net income rose more than 25% to $38.4 million, or $0.54 per share, from $30.2 million, or $0.44 per share, for the corresponding period in 1995.

The company's CEO, Donald H. Dye, declined to comment.

By Avi Stieglitz

astieglitz@thestreet.com