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Canopy Growth (CGC) to Report Q2 Earnings: What's in Store?

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Canopy Growth Corporation (CGC - Free Report) is scheduled to report second-quarter fiscal 2021 results on Nov 9, before market open.

In the first quarter of fiscal 2021, the company's loss per share of 20 cents was narrower than the Zacks Consensus Estimate of a loss of 28 cents. The company missed estimates in two of the trailing four quarters and surpassed estimates in the other two, the average negative surprise being 109.2%.

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

Factors at Play

Canopy Growth, which is well positioned in the Canadian recreational cannabis market on robust customer demand, has lately been witnessing strength in its business channels despite the pandemic-led business disruptions. This is likely to have driven the company’s second-quarter fiscal 2021 performance.

The company, in July, launched one of its new e-commerce website — shopcanopy.com — in the United States. Notably, the website is dedicated to the company’s robust portfolio of U.S. hemp-derived CBD product lines and will enable customers to choose from product SKUs from brands including First & Free, This Works and BioSteel, as well as the Martha Stewart CBD. This is likely to have aided U.S. customers to procure Canopy Growth’s products, thus boosting the company’s fiscal second-quarter top line.

BioSteel Sports Nutrition Inc., Canopy Growth’s acquired business, announced the availability of its ready-to-drink non-CBD hydration sports drinks in environmentally friendly Tetrapak packaging in the United States, which is expected to have boosted the brand’s sales. This is likely to have boosted the fiscal second-quarter revenues of Canopy Growth.

Canopy Growth Corporation Price and EPS Surprise

Canopy Growth Corporation Price and EPS Surprise

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

Per the company, although BioSteel saw an increase in sales from its e-commerce channel, it was offset by a significant decline in traditional retail sales due to the pandemic-led closure of many brick-and-mortar retailers in Canada. However, management is optimistic about the improved performance from BioSteel due to the easing of COVID-19-related retail restrictions in Canada. This is likely to have a significant impact on the company’s top line in fiscal second quarter.

Canopy Growth, during its last update in August, had confirmed that its acquired business Storz & Bickel’s Volcano Medic 2 advanced cannabis vaporizer device has been witnessing strong consumer pull in Europe and expanded distribution in North America over the past few months. This is likely to have continued during fiscal second-quarter, thus driving the top line.

The company, in August, announced the opening of 10 brick-and-mortar retail cannabis stores across Alberta, where the company’s Tweed and Tokyo Smoke brands will be available. Also, per Canopy Growth’s update the same month, the company has witnessed retail store licensing and openings in key provincial markets, especially Ontario, over the past few months. The company expects this trend in Ontario to have continued during the quarter and have a positive impact on the sector sell-in into that province. These are likely to have significantly boosted the company’s sales, thus driving up revenues.

Further, the company’s ready-to-drink cannabis-infused beverages, Tweed Houndstooth & Soda and Tweed Bakerstreet & Ginger, are expected to have continued with their robust performance during the to-be-reported quarter. Other beverages like the Houseplant Grapefruit and Deep Space are also currently available in the market. These are likely to have significantly boosted the company’s second-quarter fiscal 2021 performance.

The company’s vape portfolio includes products like JUJU Power, which is the sector’s only Underwriter Laboratories 8139 safety standards-certified rechargeable battery for 510 cartridges. Over the past few months, the JUJU Power 510 battery is the company’s top-selling accessory SKU in company-owned stores. Further, the Tokyo Smoke Luma pod-based vape devices, Luma Go pods and Pause pods, are available in the Canadian recreational market. This is likely to have contributed to revenues in fiscal second quarter.

Other notable products that are likely to have driven the top line include one-ounce SKUs Twd. 28 Sativa and Twd. 28 Indica.

The company also expanded its First & Free brand into topicals and creams. This Works’ (Canopy Growth’s acquired business) line of CBD Booster skincare and its stress-free hand sanitizers (Stress Check) are other notable offerings. All these are likely to have driven the top line significantly. Notably, the Stress Checkhand sanitizers have witnessed favorable customer response in the United Kingdom and are supposed to be launched in the U.S. market as well.

The Estimate Picture

The Zacks Consensus Estimate for total revenues for fiscal second quarter of $87.6 million suggests growth of 50.9% from the prior-year quarter’s figure.

The consensus mark of a loss of 23 cents per share for fiscal second quarter indicates a surge of 71.9% from the year-ago quarter's reported figure.

What Our Model Suggests

Our proven model predicts an earnings beat for Canopy Growth this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Canopy Growth has an Earnings ESP of +7.55%. 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 other medical stocks worth considering, as these too have the right combination of elements to beat on earnings this reporting cycle.

IDEXX Laboratories, Inc. (IDXX - Free Report) has an Earnings ESP of +2.79% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp has an Earnings ESP of +4.94% and is a Zacks #1 Ranked stock.

ResMed Inc. (RMD - Free Report) has an Earnings ESP of +1.88% and it flaunts a Zacks Rank of 1 at present.

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