What's in Store for Canopy Growth (CGC) in Q2 Earnings?

Canopy Growth's (CGC) newly-added Ace Valley and Supreme Cannabis hold part of the company's market share in fiscal Q2.

This story originally appeared on Zacks

Canopy Growth Corporation CGC is scheduled to report second-quarter fiscal 2022 results on Nov 5, before the opening bell.

- Zacks

In the first quarter of fiscal 2022, the company reported a loss of 13 cents, narrower than the Zacks Consensus Estimate of a loss of 18 cents.

The company missed estimates in two of the trailing four quarters and surpassed the same in the other two, the average negative surprise being 109%.

Let's take a look at how things have shaped up prior to this announcement.

Factors at Play

Canopy Growth, which is well positioned in the growing Canadian recreational cannabis market, has lately been witnessing strength in its business channels amid the post-pandemic recovery. In the fiscal first quarter, despite a challenging industry backdrop, Canada’s recreational business outperformed many of the country’s LPs (licensed producers). However, this trend might have been disrupted to some extent in the second-quarter fiscal 2022 impacted by COVID-19 resurgence.

However, the company’s U.S. cannabidiol (CBD) business has been consistently gaining momentum in recent times on the back of its highly-successful Martha Stewart CBD product line which is now the No. 3 CBD brand nationally across food, drug, mass and convenience channels per IRI. Per the company’s August update, Canopy Growth's CBD-infused sparkling water Quatreau, launched in seven states, has been sold at more than 1,000 homes. Further, the company’s consumer products brands are delivering strong growth driven by Canopy Growth-acquired Storz & Bickel (designers and manufacturers of the only medically approved vaporizers) business. These developments are expected to have positively contributed to the company’s fiscal second-quarter top line despite the pandemic-induced temporary softness.

Canopy Growth Corporation Price and EPS Surprise

Canopy Growth Corporation Price and EPS Surprise

Canopy Growth Corporation price-eps-surprise | Canopy Growth Corporation Quote

Further, over the past few months, BioSteel Sports Nutrition Inc., Canopy Growth’s acquired business, has been witnessing continued momentum driven by Amazon U.K. and U.S. expansion. Further, BioSteel has unveiled a long-term brand ambassador partnership with All-Star basketball player, Luka Doncic of the Dallas Maverick and has secured a multi-year partnership with the U.S. Soccer Federation. These developments are likely to have considerably driven fiscal second-quarter revenues.

Since the last reported quarter, the company’s Ace Valley and Supreme Cannabis brands have held part of Canopy Growth’s market share. Per the company’s August update, following the Ace Valley acquisition, the company’s sales team has now become fluent in the Ace Valley brand. It is securing listings in several provinces and driving incremental distribution of Ace Valley products that are already in market. Since integration, Canopy Growth has launched a number of new products under the Ace Valley brand, including Ace Valley Dream CBN Gummies and Ace Valley Pinners.

The company’s share in the ready-to-drink category in Ontario has also been robust over the past few months. In June 2021, the company acquired Supreme Cannabis — one of the top 10 licensed producers in Canada with a leading premium brand portfolio. The acquisition adds a low-cost, scalable cultivation facility at Kincardine, Ontario. In April, the company launched Vert — the company’s first Quebec-exclusive brand. Following the launch, it now has a new offering of local cannabis flower to SQDC shelves. These developments are expected to have contributed significantly during the fiscal second quarter, adding to the top line.

The Estimate Picture

The Zacks Consensus Estimate for total fiscal second-quarter revenues of $116.9 million suggests growth of 3.33% from the prior-year quarter’s reported figure.

The consensus mark for loss stands at 14 cents per share for the fiscal second quarter. The company had reported earnings of 16 cents per share in the year-ago quarter.

What Our Model Suggests

Per our proven model, stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a good chance of beating estimates. This is exactly the case as you can see:

Earnings ESP: Canopy Growth has an Earnings ESP of +26.83%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are a few medical stocks worth considering as these also have the right combination of elements to beat on earnings this reporting cycle.

BellRing Brands BRBR has an Earnings ESP of +14.11% and a Zacks Rank of 2. The company will release third-quarter fiscal 2021 results on Nov 18. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gemini Therapeutics GMTX has an Earnings ESP of +17.61% and a Zacks Rank of 2. The company will report third-quarter 2021 results on Nov 11.

Black Diamond Therapeutics BDTX has an Earnings ESP of +1.87% and a Zacks Rank of 3. The company is scheduled to release third-quarter 2021 results on Nov 9.

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