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KushCo (KSHB) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

KushCo Holdings, Inc. KSHB will soon release second-quarter fiscal 2019 (ended February 2019) numbers.

The company delivered weaker-than-expected results in the last reported quarter (ended Nov 30, 2018). Its loss per share of 10 cents was 150% wider than the Zacks Consensus Estimate for loss of 4 cents.

In the past three months, shares of this company have decreased 2.6% against the industry’s growth of 19.6%.

Let us see how things are shaping up for KushCo this quarter.

Factors to Affect Q2 Results

We believe that presence in multiple end-markets, including regulated CBD and cannabis markets, as well as solid product offerings will be boon for KushCo. The company will likely enjoy high product demand — especially from the CBD industry after the 2018 Farm Bill turned into law. Focus on developing products, effective management team and product launches scheduled in 2019 will also be boons.

To add, KushCo is keenly working toward increasing the international presence, as evident from new office in China as well as driving operational efficacy through a new warehouse management system. Margin improvements are predicted in the second half of fiscal 2019. The company anticipates achieving gross margin of 30%, higher than roughly 20% recorded in the first quarter of fiscal 2019.

Despite all the tailwinds, KushCo can be adversely impacted by supply-chain capacity headwinds. These issues might inflate freight costs for the company, impacting margins. Also, stringent quality control measures of the vendors might be concerning.

Earnings Whispers

Our proven model provides some idea about the stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with the company has been provided below.

Earnings ESP: KushCo has an Earnings ESP of 0.0%. Both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at loss of 9 cents per share.

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

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the Zacks Industrial Products sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

Honeywell International Inc. HON has an Earnings ESP of +0.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

HD Supply Holdings, Inc. HDS has an Earnings ESP of +0.81% and a Zacks Rank #3.

General Electric Company GE has an Earnings ESP of +17.17% and a Zacks Rank #3.

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