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Will Q4 Results Continue to Fuel Momentum in Marijuana ETF?

Sweta Killa
Higher contributions from liquids pipelines segment back Enbridge's (ENB) Q4 numbers.

The marijuana industry is burning hot due to easing regulations on the once highly guarded drug, marijuana, for recreational and medical usage. In fact, Canada’s legalization of recreational cannabis among adults has spread strong optimism into the space. Additionally, a number of states in the United States joined the race of marijuana legalization. Congress, the White House and U.S. regulators have also softened their stance on the drug’s legalization.

Against this backdrop, ETFMG Alternative Harvest ETF MJ — the first and only pure ETF targeting the cannabis/marijuana industry — has gained 41.2% so far this year. Now, investors are keen to watch whether legalization is living up to the hype in the quarterly results of the cannabis stocks. Four of the largest cannabis producers in Canada — Aurora Cannabis ACB, Canopy Growth CGC, Cronos Group CRON and Tilray TLRY — are expected to report results over the coming weeks. These stocks are the top four holdings in the fund’s basket with a combined 39.4% share (read: Marijuana ETF Joins Billion Dollar Club).

Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the marijuana ETF in the coming days:

Earnings Preview for These Stocks

Aurora Cannabis is expected to report results on Feb 11. Last month, the company provided revenue guidance in the range of $50-$55 million for the soon-to-be-reported second-quarter fiscal 2019, reflecting more than 327% growth from the year-ago quarter and in excess of 68% from the previous quarter (read: Buy the Dip in Marijuana Stocks & ETF?).

Canopy Growth carries a Zacks Rank #3 and has an Earnings ESP of -11.63%, indicating lower chance of beating estimates this quarter. According to the our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The earnings surprise of CGC track over the past four quarters is disappointing, with average negative surprise being 321.5%. Canopy Growth saw negative earnings estimate revision of seven cents over the past 30 days for the quarter to be reported. The stock has a VGM Score of F. Canopy Growth will report earnings on Feb 14.

Cronos Group has a Zacks Rank #5 and an Earnings ESP of 0.00%. The stock saw no earnings estimate revision for to-be-reported quarter over the past 30 days. It delivered an average positive earnings surprise of 25% for the past four quarters. It has a VGM Score of F. Cronos Group is scheduled to report earnings on Feb 22 (read: 5 Top Performing Stocks of Marijuana ETF).

Tilray is expected to report results on Feb 22. It has a Zacks Rank #5 and an Earnings ESP of -45.46%. The stock delivered a negative earnings surprise of 23.02% in the last four quarters. However, it has witnessed positive earnings estimate revision of a couple of cents over the past 30 days for the to-be-reported quarter. Tilray has a VGM Score of F.

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Cronos Group Inc. (CRON) : Free Stock Analysis Report
 
Canopy Growth Corporation (CGC) : Free Stock Analysis Report
 
Tilray, Inc. (TLRY) : Free Stock Analysis Report
 
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