Tilray (NASDAQ:TLRY), Inc. TLRY is scheduled to report second-quarter 2020 results on Aug 10, after market close.
In the last reported quarter, the company missed earnings expectations by 11.4%. The company, which went public in July 2018, has a disappointing track record.
Tilray missed earnings estimates in the last four quarters, the average negative surprise being 51.31%.
Let us see how things have shaped up prior to this announcement.
Factors at Play
Tilray produces medical cannabis in Canada and Europe. Revenues increased significantly year over year in the last reported quarter, driven by growth in cannabis sales and the Manitoba Harvest acquisition. The sequential growth was driven by a 23% increase in adult-use sales and 14.3% in hemp product sales. A similar trend is expected to have continued in the to-be-reported quarter.
Notably, Tilray acquired Manitoba Harvest — a hemp and natural foods producer in Winnipeg, Manitoba — in 2019. The acquisition is likely to have spurred demand year over year for the company’s products in the second quarter.
Total cannabis kilogram equivalents sold increased significantly in the last reported quarter owing to higher adult-use cannabis flower sales and the launch of Cannabis 2.0 products. These are likely to have benefited the company’s second-quarter performance as well.
However, an increase in operating expenses related to growth initiatives might have adversely impacted the gross margin. The company has recently undertaken significant steps to drive efficiencies across the business and the positive impact of these actions might be reflected in the upcoming quarterly results. In May 2020, Tilray announced that its wholly-owned subsidiary, High Park Gardens, will remain closed for six weeks. As a result of the closure, the company expects to realize annualized net savings of approximately $7.5 million (current production costs net of future third party purchases and ongoing depreciation) and avoid significant ongoing capital expenditures.
Apart from the top and bottom-line numbers, investors will focus on the company’s collaboration deals to expand the global footprint.
In January, the company signed a 2.5-tonne partnership agreement with Canndoc (an Israeli Medical Cannabis Agency) to export medical cannabis from Tilray’s European Union facility in Portugal to Israel.
Moreover, investors will be keen to know if the coronavirus pandemic has impacted the company’s business.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Tilray this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Unfortunately, that is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Tilray is 0.00%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Share Price Performance
Tilray’s stock has depreciated 52.7% in the year so far compared with the industry’s decline of 4.6%.
Stocks to Consider
Here are a few stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
Ocular Therapeutix (NASDAQ:OCUL), Inc. OCUL has an Earnings ESP of +1.59% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intercept Pharmaceuticals, Inc. ICPT has an Earnings ESP of +10.76% and a Zacks Rank #3.
AcelRx Pharmaceuticals, Inc. ACRX has an Earnings ESP of +40.74% and a Zacks Rank #3.
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