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Cronos (CRON) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

Cronos Group’s CRON earnings missed expectations by 150.0% in the fourth quarter of 2018.

Let us see what is in store for the first quarter.

Cronos Group Inc. Price, Consensus and EPS Surprise

 

Cronos Group Inc. Price, Consensus and EPS Surprise | Cronos Group Inc. Quote

Factors in Focus

Cronos is a globally diversified and vertically integrated cannabis company.  It generated a staggering 248% revenue uptick in the fourth quarter of 2018, driven by shipments to the Canadian adult-use market and solid growth in cannabis oil revenues. We expect the momentum to further continue in the first quarter.

In October 2018, Canada became the first G7 country and the second in line, worldwide, to legalize cannabis sales for adult recreational use. Cronos participated in this new market via its two new adult-use brands — Cove and Spinach.

Last year, the company expanded its production footprint domestically as well as internationally, widened its distribution channels with global partnerships, launched iconic brands for the Canadian adult-use market and braced its IP portfolio with landmark research and development initiatives.

This, in turn, should boost its sales in the first quarter.

Therefore, investors will focus on Cronos’ pipeline progress and its crucial updates when the company reports first-quarter results.

Key Event in Q1

Altria Group MO invested C$2.4 billion in Cronos this March, representing an approximate 45% ownership in the company. Altria also has a warrant to acquire additional interest in Cronos, which is exercisable over the next four years. This strategic partnership with Altria provides Cronos with surplus financial resources, product development and commercialization capabilities plus a deep regulatory expertise to leverage its position in the global cannabis industry.

Earnings Whispers

The proven Zacks model does not conclusively show that Cronos will beat on earnings this time around. This 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 surpass estimates. Unfortunately, that is not the case here as you will see below.

Earnings ESP: Cronos has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at an equal value. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter..

Zacks Rank: Cronos currently carries a Zacks Rank #5 (Strong Sell), which decreases the predictive power of ESP. We caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some health care stocks worth considering as our model shows that these have the right combination of elements to exceed earnings estimates this reporting cycle.

Horizon Pharma plc HZNP is scheduled to report first-quarter 2019 results on May 8. The company has an Earnings ESP of +25.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here..

Clovis Oncology, Inc. CLVS has an Earnings ESP of +5.45% and a Zacks Rank #2. It is scheduled to report first-quarter 2019 results on May 7.

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