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Tilray to Report Earnings Today: Will It Top or Flop?

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Tilray, Inc. (TLRY - Free Report) , which engages in the research, cultivation, processing, and distribution of medical cannabis, is set to report earnings on Aug 13, after market close. Global marijuana legalization to the rapidly increasing use of CBD as a wellness product should help Tilray witness revenue growth.

In fact, Tilray recently announced the receipt of approval to import cannabis into the United States to conduct two clinical trials related to CBD (cannabidiol). The company had completed a long term, revenue-sharing agreement with Authentic Brands Group to leverage the respective brand portfolios, and develop, market and distribute consumer cannabis products worldwide. The partnership will initially focus on CBD products in the United States and then around the globe.

And these are great news for Tilray as CBD is a sensation right now. We all know that hemp got legalized in the 2018 Farm Bill, following which a slew of hemp-based commodities were sold online and in mom-and-pop stores. However, CBD was placed under the review of the FDA, which recently said that there may be real risks associated with it.

But the regulatory authority acknowledged that there is immense public interest in CBD as a wellness aid. Lest we forget, CBD is widely used in treating pain, inflammation and epilepsy.

Talking about strong demand for CBD, analysts estimated that nearly 65 million Americans have tried CBD and 63% found it effective. What’s more, CBD is a growing industry. Market research firm Brightfield projected that CBD sales in the United States alone will jump 55% to $648 million by the end of this year. In fact, they expect the U.S. hemp CBD market to reach a worth of $22 billion by 2022.

And if we consider a more conservative estimate, the numbers are still encouraging. For instance, investment firm Piper Jaffray forecasted annual U.S. hemp CBD sales of around $15 billion by 2023. Needless to say, companies such as GW Pharmaceuticals plc , Canopy Growth (CGC - Free Report) and Aurora Cannabis (ACB - Free Report) have benefitted immeasurably from venturing into CBD.

Nonetheless, the Zacks Consensus Estimate calls for second-quarter sales growth of more than $40 million for Tilray from the year-ago $9.7 million.

Improved revenue results will surely lead to an uptick in the share price. The Zacks Rank #2 (Buy) company’s expected earnings growth for the current year is pegged at 61.4%, way higher than the Medical - Drugs industry’s projected rally of 10.4%. By the way, Tilray has already outpaced the broader industry over the past year (+75.1% vs -17.4%). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, our model does not conclusively a beat for Tilray this earnings season. That is because a stock needs to have both a positive Earnings ESP  and a Zacks Rank #1, 2 or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here.

The company’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of 23 cents.

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