Cronos (CRON) To Report Q3 Earnings: What's In The Cards?

Cronos Group Inc., (NASDAQ:CRON) is expected to release third-quarter 2018 results on Nov 13.

In the last reported quarter, Cronos reported break-even earnings.

Factors in Focus

Cronos is a globally diversified and vertically integrated cannabis company.

The company sells dried cannabis and cannabis oils through wholesale and direct-to-consumer channels under its medical cannabis brand, PEACE NATURALSTM. The company operates two wholly-owned Canadian licensed producers — Peace Naturals Project Inc., which was the first non-incumbent medical cannabis license granted by Health Canada, and Original BC Ltd., which is based in the Okanagan Valley, British Columbia.

In April 2018, the company raised $100.0 million of gross proceeds through a bought deal offering of common shares.

The company posted significant sales growth in the second quarter, driven by an expansion in patient onboarding, an increase in average sales price and the continued strong growth in cannabis oil offering. We expect the momentum to continue in the third quarter as well.

In October 2018, Canada became the first G7 country and the second country in the world to legalize cannabis sales for adult recreational use. This, in turn, should propel sales for Cronos and other companies like Tilray (NASDAQ:TLRY) .

We expect the company’s plan to meet the growing demand resulting from the legalization. Meanwhile, investors will focus on pipeline updates.

In September 2018, Cronos Group and Aleafia Health Inc. initiated a joint medical cannabis study to improve the management and treatment of insomnia and daytime sleepiness. In August 2018, Cronos announced a supply agreement with Cura Cannabis Solutions, one of the largest cannabis companies in the world.

Cura signed a five year take-or-pay supply agreement to purchase a minimum of 20,000 kilograms of cannabis per annum from Cronos GrowCo, as and when it receives production and sales licenses from Health Canada. In June 2018, Cronos entered into a strategic distribution partnership with Delfarma Sp. Zo.o. Per the five-year exclusive distribution agreement, Cronos will supply PEACE NATURALS branded cannabis products to Delfarma for distribution within Poland.

Earnings Whispers

Our proven model does not conclusively show that Cronos will beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.0%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate is -$0.02. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zacks Rank: Cronos currently carries a Zacks Rank #3 (Hold), which is favourable. However, the 0.0% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Share Price Performance

Stocks to Consider

Here are some health care stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

CRISPR Therapeutic (NASDAQ:CRSP) has an Earnings ESP of +3.53% and a Zacks Rank #1. The company is expected to release third-quarter results on Nov 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

FibroGen, Inc. (NASDAQ:FGEN) has an Earnings ESP of +13.46% and a Zacks Rank #2. The company is scheduled to report third-quarter results on Nov 8.

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