Earnings preview: Cronos could see momentum in Q2

Cronos Group Inc. (NASDAQ: CRON) is scheduled to report second quarter 2019 earnings results on Thursday, August 8, before market open. Analysts expect the company to report a loss of $0.02 per share on revenue of $5.6 million.

The cannabis industry hit a rough patch in the past few months with companies delivering weak earnings and facing bad press over violations and warnings. However, things seem to be picking up now. Despite a few setbacks, it seems there are still growth opportunities in the cannabis market.

Cronos has been making several efforts to take advantage of these opportunities. The Toronto-based company entered into a cannabis concentrate supply agreement with MediPharm Labs in May. Last month, Cronos agreed to purchase an 84,000 sq.ft. fermentation and manufacturing facility in Canada, which will enable it to produce cultured cannabinoids on a large scale.

Cronos also entered into a deal with Heritage Cannabis Holdings for filling and packaging vaporizers for the Canadian cannabis adult-use and medical market. The deal has an annual potential value of $35 million.

On Friday, Cronos announced the acquisition of four of Redwood Holding Group’s operating subsidiaries for approx. $300 million. Redwood produces and markets cannabidiol-infused skincare and other consumer products in the US under the brand Lord Jones.

Tobacco giant Altria (NYSE: MO) made a $1.8 billion investment in Cronos last year and holds a 45% stake in the cannabis company. It will be interesting to watch how these partnerships and investments pan out for Cronos.

Also see: Aphria Q4 2019 Earnings Report

In the first quarter of 2019, Cronos more than doubled its revenues to CAD6.5 million but narrowly missed estimates. The company also reported a profit of CAD0.48 per share when Wall Street had expected a loss.

Cronos’ shares gained 111% in the past one year but over the past one month, they fell 17%. The stock climbed over 5% on Friday over news of the Redwood acquisition.

Cronos’ peer Aphria Inc. (NYSE: APHA) reported better-than-expected fourth quarter 2019 earnings results on Thursday, with a revenue growth of 969% year-over-year to CAD128.6 million. Adjusted net loss was CAD0.02 per share.

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