Can Cannabis Therapy Drive Canopy Growth's (CGC) Q1 Earnings?

Canopy Growth Corp (NYSE:CGC) is scheduled to report first-quarter fiscal 2020 results on Aug 14, after market close.

In the fourth quarter of fiscal 2019, the company's loss per share of 67 cents was narrower than the Zacks Consensus Estimate of a loss of 17 cents. The company missed estimates in each of the trailing four quarters, the average miss being 320.9%.

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

Factors at Play

Over the past few quarters, Canopy Growth has been seeing robust performance by its key business segment viz. cannabis therapy.

In May 2019, the company acquired Europe's largest cannabinoid-based pharmaceutical manufacturer C3 along with five approved cannabinoid therapies. These acquisitions are expected to have significantly contributed to the company’s top line in the first quarter.

The company has also taken over This Works, a global leader in natural skincare and sleep solutions. This deal is expected to strengthen Canopy Growth’s position in the market and enable it to offer CBD-based products.The merger between Canopy Growth and Acreage Holdings has been progressing well and is expected to have benefited the former in the first quarter as well.

The acquisition deals with AgriNextUSA and Storz & Bickel are expected to have driven the results of the to-be reported quarter.

Lately, the company has been expanding its product portfolio through solid investments. The company has been investing in cultivation and post-harvest processing capacity. For the to-be-reported quarter, the company is expected to have harvested nearly 34,000 kilograms of cannabis, which is more than double the amount harvested in the fourth quarter of fiscal 2019.

The company continues to invest in various extraction and advanced manufacturing capabilities to further automate its processes and lay the groundwork for the next batch of product platforms. Canopy Growth has been building its CBD platform in the United States and accelerating its investments in markets beyond North America. We expect these investments to reflect in first-quarter fiscal 2020 results.

In the last-reported quarter, the company suffered a drop in gross margin. We expect the same for the fiscal first quarter.

Which Way Are Q1 Estimates Treading?

For first-quarter fiscal 2020, the Zacks Consensus Estimate for total revenues of $85.9 million implies growth of 327.9% from the prior-year quarter’s reported figure. Also, the consensus estimate of a loss of 28 cents is 9.7% wider than the year-ago quarter's reported figure.

What Our Quantitative Model Predicts

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high 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 and an Earnings ESP of -2.35%, which makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to post earnings beat this quarter.

Aurora Cannabis (TSX:ACB) has an Earnings ESP of +50.00% and a Zacks Rank #2.

Arcturus Therapeutics (NASDAQ:ARCT) has an Earnings ESP of +18.36% and a Zacks Rank #2.

Myriad Genetics (NASDAQ:MYGN) has an Earnings ESP of +0.71% and a Zacks Rank #3.

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