Can Canadian Market Drive Canopy Growth (CGC) Q3 Earnings?


Canopy Growth Corporation CGC is expected to report third-quarter fiscal 2019 results on Feb 14, after market close.

In the last reported quarter, the company's loss per share of 76 cents was wider than the Zacks Consensus Estimate of a loss of 13 cents.

Let's see how things are shaping up prior to this announcement.

Key Catalyst

Similar to the last reported quarter; Canopy Growth is expected to gain from an expanding patient base in the Canadian medical cannabis market. Further, the launch of Spectrum Cannabis color-coded soft gels, which provide continuous and discrete dosing formats, is projected to boost the top line in the to-be-reported quarter.

Canopy Growth has been actively gearing up to capture opportunities stemming from the legalization of recreational use of cannabis in Canada on Oct 17, 2018. In this regard, the company has launched pre-rolled joints which are created on an equipment set that meets the strict standards of weight per roll. Canopy Growth is also actively involved in creating its private cannabis retail channel in Canada in order to capture retail market.

Canopy Growth Corporation Price and EPS Surprise

Canopy Growth Corporation Price and EPS Surprise | Canopy Growth Corporation Quote

Other factors that are likely to influence Canopy Growth's third-quarter results are as follows:

The company actively strengthens its presence in key international markets. We are upbeat about Canopy Growth's successful completion of first shipment to the United states under the US Drug Enforcement Agency approval in the fiscal second quarter. The company is also going strong in Jamaica where it expects around 4.2-5 million tourists to get familiar with the brand. Backed by the success in Jamaica, Canopy Growth expects to export to another Caribbean island as well.

Canopy Growth is also performing well in Latin America. With major activities being primarily headquartered in Colombia, the company is performing well in Brazil and is building its capacity in Chile. Also, in jurisdictions with established federal frameworks in Europe, Canopy Growth is involved in the production and distribution of medical cannabis. The company is also making efforts to cater to the demand in expanding throughout 2019, including owned and partner facilities in Denmark, Germany and Spain. We believe the strong geographical operations of Canopy Growth will contribute to its top line in the to-be-reported quarter.

The company is also seeing increasing quantities of harvested cannabis. In the fiscal second quarter, Canopy Growth harvested 15,217 kgs. Canopy Growth has also increased total Softgel production capacity to several million per week, representing a 10-fold increase year over year.

Overall, the Zacks Consensus Estimate for third-quarter total revenues is pegged at $66.09 million, showing a rise of 286.7% from the prior-year quarter.

Here's What Our Quantitative Model Predicts

Our proven Zacks model clearly indicates that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Canopy Growth has a Zacks Rank #3, which increases the predictive power of ESP. However, the company's Earnings ESP of 0.00% makes surprise prediction difficult. Thus, this combination fails to show a positive surprise for the stock this reporting cycle.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Masimo Corporation MASI has an Earnings ESP of +1.04% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Medidata Solutions, Inc. MDSO has an Earnings ESP of +0.54% and a Zacks Rank #3.

Wright Medical Group N.V. WMGI has an Earnings ESP of +58.24% and a Zacks Rank #2.

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