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Canopy Growth (CGC) to Report Q1 Earnings: What's in Store?

Canopy Growth Corporation CGC is scheduled to report first-quarter fiscal 2021 results on Aug 10, before market open.

In the fourth quarter of fiscal 2020, the company's loss per share of $1.16 was wider than the Zacks Consensus Estimate of a loss of 30 cents. The company missed estimates in two of the trailing four quarters and surpassed estimates in the other two, the average negative surprise being 111.17%.

Let's take a look at how things are shaping up prior to this announcement.

Factors at Play

Canopy Growth, although well positioned in the Canadian recreational cannabis market on robust customer demand, has lately been witnessing pandemic-led business disruptions. This is likely to have impacted the company’s first-quarter fiscal 2021 performance.

However, during the fourth-quarter fiscal 2020 earnings call in May, Canopy Growth confirmed the reopening of 20 corporate-owned retail stores. The other two were supposed to be opened in the first week of June, per the company’s confirmation. Store reopening is likely to have boosted sales, thus driving the top line.

Canopy Growth Corporation Price and EPS Surprise

 

Canopy Growth Corporation Price and EPS Surprise

Canopy Growth Corporation price-eps-surprise | Canopy Growth Corporation Quote

Further, the company launched its ready-to-drink cannabis-infused beverages, Tweed Houndstooth & Soda and Tweed Bakerstreet & Ginger, in March and April 2020, respectively in the Canadian market. Since the fiscal fourth quarter, the former has started to record favorable early reviews and strong consumer demand across the country, with further shipments being sent to provincial boards and retailers to meet the rising demand. Other beverages like the Houseplant Grapefruit and Deep Space are also currently available in the market. These are likely to have significantly boosted the company’s first-quarter fiscal 2021 performance.

The company’s vape portfolio includes products like JUJU Power, which is the sector’s only Underwriter Laboratories 8139 safety standards-certified rechargeable battery for 510 cartridges. Over the past few months, the JUJU Power 510 battery is the company’s top-selling accessory SKU in company-owned stores. Canopy Growth also launched 510 vape cartridges under the Tweed in TWD brands. Further, the Tokyo Smoke Luma pod-based vape devices, Luma Go pods and Pause pods, are available in the Canadian recreational market. This is likely to have contributed to revenues in the fiscal first quarter.

Other notable launches that are likely to have driven the top line include one ounce SKUs Twd. 28 Sativa and Twd. 28 Indica.

The company also expanded its First & Free portfolio in the United States by introducing a new line of hemp derived CBD creams. This Works (Canopy Growth’s acquired business) launched a line of CBD Booster skincare, which is currently available through direct-to-consumer channels in the U.K. and the United States. Further, during the first quarter, This Works launched its stress-free hand sanitizers. All these are likely to have driven the top line significantly.

However, reduced production capacity of the company due to the closure of two greenhouses in British Columbia, an indoor facility in Saskatchewan and a hemp farming operation in New York is likely to show on the company’s fiscal first-quarter results.

For the past few months, Canopy Growth’s global medical cannabis business was robust but its Canadian business was flat. The company’s international medical business operates on a pharmacy model, resulting in a modest negative impact from COVID-19. Notably, the German medical market has maintained its momentum over the past few months, a trend which is likely to have continued for the rest of the fiscal first quarter.

The Estimate Picture

The Zacks Consensus Estimate for total revenues of $73.7 million suggests growth of 8.9% from the prior-year quarter’s figure.

However, the consensus mark of a loss of 29 cents per share indicates a fall of 26.1% from the year-ago quarter's reported figure.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has good chances of beating estimates. However, this is not the case here as you can see:

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Canopy Growth has an Earnings ESP of -15.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

ResMed Inc. RMD has an Earnings ESP of +20.93% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex Corporation LMNX has an Earnings ESP of +82.61% and it has a Zacks Rank of 2 at present.

QIAGEN N.V. QGEN is a Zacks #1 Ranked stock with an Earnings ESP of +15.79%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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