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Tilray (TLRY) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Tilray, Inc. TLRY is expected to release fourth-quarter 2018 results on Feb 12.

In the last reported quarter, Tilray beat earnings expectations by 42.9%. The company went public in July 2018.

Pipeline Progress in Focus

Tilray produces medical cannabis in Canada and Europe. In July 2018, Tilray completed its IPO, selling 10,350,000 shares of Class 2 common stock at $17 per share (C$22.45 per share). The company received net proceeds of $163.6 million, after deducting the underwriting discount.

The company has two product categories — dried cannabis, which includes whole flower and ground flower, and cannabis extracts, which includes full-spectrum and purified oil drops and capsules. The company recorded 85.8% growth in revenues, driven by increased patient demand, bulk sales to other licensed producers and accelerated wholesale distribution in export markets. We expect the momentum to continue in the fourth quarter as well.

There is a global paradigm shift with regard to cannabis. As a result of this shift, the multi-billion-dollar cannabis industry is transforming from a state of prohibition to a state of legalization. Medical cannabis is now authorized at the national or federal level in 29 countries. Although the legal market for medical cannabis is still in its early stages, it represents huge potential. Recreational cannabis was legalized on Oct 17, 2018, by the Federal Government.

In September 2018, Tilray announced that the U.S. Drug Enforcement Administration (DEA) has approved an import pharmaceutical-grade medical cannabis product produced by Tilray in the United States, for a clinical trial focused on Essential Tremor (ET), a neurological movement disorder. The drug will be imported from Canada for a clinical trial to be conducted at the University of California San Diego (UC San Diego) Center for Medicinal Cannabis Research (CMCR) to examine its safety, tolerability and efficacy for ET.

Tilray has been working to broaden its global footprint. In December 2018, Tilray announced that its subsidiary, Tilray Canada Ltd. has entered into a global framework agreement with the generic arm of Novartis NVS, Sandoz AG, expanding the current collaboration. Under the new agreement, Tilray will collaborate with Sandoz to increase the availability of high-quality medical cannabis products across the world. The company recently entered into a research partnership with world’s leading brewer, Anheuser-Busch InBev SA/NV to research non-alcohol beverages containing tetrahydrocannabinol and CBD.

The company recently entered into a marketing agreement with Authentic Brands Group. Both the companies have entered into a long-term revenue sharing agreement to market and distribute a portfolio of consumer cannabis products within Authentic’s brand portfolio, in jurisdictions where regulations permit.

In October 2018, Tilray acquired its existing Chile-based import and distribution partner, Alef Biotechnology SpA. In December 2018, Tilray announced an investment in Québec-based cannabis producer, ROSE LifeScience Inc., and an exclusive sale, supply, distribution and marketing agreement between High Park Farms Ltd., a wholly-owned subsidiary of Tilray, and ROSE.

We expect investors to focus on other business updates from the company on the call, apart from the regular top and bottom-line numbers.

Earnings Whispers

Our proven model does not conclusively show that Tilray will beat on earnings this quarter. That 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 beat estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -45.46%. This is because the Most Accurate Estimate stands at -$0.24 and the Zacks Consensus Estimate is -$0.17. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zacks Rank: Tilray currently carries a Zacks Rank #3 (Hold). Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Share Price Performance

Tilray’s stock has gained 257.2% after it went public, against the industry’s decline of 15.1% in the last twelve months.


Stocks to Consider

Here are some health care stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Mallinckrodt MNK has an Earnings ESP of +2.25% and a Zacks Rank #2. The company is scheduled to report results on Feb 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACADIA Pharmaceuticals Inc. ACAD has an Earnings ESP of +3.89% and a Zacks Rank #3.

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