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Canopy Growth (CGC) to Report Q4 Earnings: What's in Store?

Canopy Growth Corp CGC is scheduled to report fourth quarter and fiscal year 2020 ended Mar 31, results on May 29, before market open.

In the third quarter of fiscal 2020, the company's loss per share of 27 cents was narrower than the Zacks Consensus Estimate of a loss of 36 cents. The company missed estimates in two of the trailing four quarters and surpassed estimates in the other two, the average negative surprise being 113.03%.

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

Factors to Note

Lately, Canopy Growth has been seeing robust performance by its key business segment - Cannabis Therapy.

The company is well positioned in the Canadian recreational cannabis market on robust customer demand. Per the company’s third-quarter earnings call, its sales of dried flower remained strong across all price ranges, thus boosting same-store retail sales. Notably, continued strong demand was witnessed for Canopy Growth’s value price TWD strain as well as premium strains. This is expected to have continued in the fiscal fourth quarter as well.

Canopy Growth Corporation Price and EPS Surprise


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

Canopy Growth’s medical cannabis markets were robust in the fiscal third quarter of 2020 per the company, a trend which is likely to have continued in the fourth quarter. The market has been seeing an expanding customer base. Per the fiscal third-quarter earnings call, management confirmed that it is making progress in key European markets, with strong sales in Germany. In the U.S. market, the company’s online sales of first and free branded hemp-derived CBD products began last December. This is likely to have contributed significantly in the fiscal fourth-quarter top line.

Canopy Growth’s products like Tokyo Smoke Go, Tokyo Smoke Pause and Tweed Baker Street were introduced in the market in December 2019 and have been well received by customers. This is expected to have continued in the fiscal fourth quarter and contributed to the top line.

The company’s vape portfolio include products like JUJU Power, which is the sector’s only Underwriter Laboratories 8139 safety standards-certified rechargeable battery for 510 cartridges. It was launched in the market in early January 2020. This segment is also expected to have contributed to revenues in the fiscal fourth quarter.

Europe's largest cannabinoid-based pharmaceutical manufacturer C3, post its buyout by Canopy Growth in May 2019 along with five approved cannabinoid therapies, has been growing well. This has contributed robustly in the last-reported quarter and is expected to have done the same in the fiscal fourth quarter.

This Works, Canopy Growth’s acquired business, had also been a robust performer in the fiscal third quarter and is expected to have maintained momentum in the fiscal fourth quarter as well. Canopy Growth’s acquisition of BioSteel Sports Nutrition to strengthen its CBD sports nutrition portfolio has paid off. This Works and BioSteel accounted for nearly 22% of the company’s revenues in the last-reported quarter, which is likely to have continued in the to-be-reported quarter as well.

However, given the current economic doldrums due to the coronavirus pandemic, Canopy Growth has closed all corporate-owned Tokyo Smoke and Tweed retail locations across Canada since Mar 17. The temporary store closures are expected to have weighed on revenues as the entire focus is shifting to e-commerce platforms. However, the company has assured the availability of fully supported e-commerce platforms to the recreational and medical cannabis customers across the country to provide business continuity for people seeking the company’s products.

The Estimate Picture

The Zacks Consensus Estimate for total revenues of $94.7 million suggests growth of 33.9% from the prior-year quarter’s figure.

Further, the consensus mark of a loss of 26 cents per share indicates an improvement of 61.2% from the year-ago quarter's reported figure.

What Our Model Suggests

Our proven model predicts a beat for Canopy Growth this time around. This is because 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.

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

Earnings ESP: Canopy Growth has an Earnings ESP of +10.76%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks Worth a Look

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

ViewRay, Inc. VRAY currently carries a Zacks Rank of 2 and has an Earnings ESP of +3.96%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Retrophin, Inc. RTRX, carrying a Zacks Rank of 2 at present, has an Earnings ESP of +13.12%.

Enanta Pharmaceuticals, Inc. ENTA is a Zacks #2 Ranked stock with an Earnings ESP of +18.93%.

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