Is A Disappointment In Store For Tilray (TLRY) Q3 Earnings?

Tilray, Inc., (NASDAQ:TLRY) is expected to release third-quarter 2018 results on Nov 13.

In the last reported quarter, Tilray missed earnings expectations by 88.9%. Tilray went public in July 2018.

Pipeline Progress in Focus

Tilray produces medical cannabis in Canada and Europe. In July 2018, Tilray completed its IPO, selling 10,350,000 shares of Class 2 common stock at $17 per share (C$22.45 per share). The company received net proceeds of $163.6 million, after deducting the underwriting discount.

The company sells two product categories — dried cannabis, which includes whole flower and ground flower and cannabis extracts, which includes full-spectrum and purified oil drops and capsules. The company recorded 95.2% growth in revenues, driven by increase in patient demand in Canada, sales to other Licensed Producers and international sales in the second quarter. We expect the momentum to continue in the third quarter as well.

There is a global paradigm shift with regard to cannabis. As a result of this shift, the multibillion dollar cannabis industry is transforming form a state of prohibition to a state of legalization. Medical cannabis is now authorized at the national or federal level in 29 countries. Although the legal market for medical cannabis is still in its early stages, it represents huge potential. Recreational cannabis was legalized on Oct 17, 2018 by the Federal Government.

In September 2018, Tilray announced that the U.S. Drug Enforcement Administration (DEA) has approved an import pharmaceutical-grade medical cannabis product produced by Tilray in the United States, for a clinical trial focused on Essential Tremor (ET), a neurological movement disorder.

The drug will be imported from Canada for a clinical trial to be conducted at the University of California San Diego (UC San Diego) Center for Medicinal Cannabis Research (CMCR) to examine its safety, tolerability and efficacy for ET.

The company is providing a cannabinoid formulation for the trial in capsule form. This will enable researchers to test an investigational drug product, containing two active ingredients extracted from the cannabis plant — cannabidiol (CBD) and tetrahydrocannabinol (THC). The study is expected to commence early 2019 with financial support from Tilray and the International Essential Tremor Foundation.

Meanwhile, in March 2018, Tilray collaborated with Sandoz Canada Inc., an affiliate of Sandoz International GmbH, which is the generic division of Novartis Group (NYSE:NVS) . In October 2018, Tilray acquired its existing Chile-based import and distribution partner, Alef Biotechnology SpA (“Alef”).

Earnings Whispers

Our proven model does not conclusively show that Tilray 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 -$0.14. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

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

Share Price Performance

Tilray’s stock has gained 332% after it went public, against the industry’s year-to-date decline of 4.1%.

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.

Horizon Pharma (NASDAQ:HZNP) has an Earnings ESP of +2.41% and a Zacks Rank #3. The company is expected to release third-quarter results on Nov 7.

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