What's in the Offing for HEXO Corp's (HEXO) Q3 Earnings?

Zacks Equity Research - finance.yahoo.com Posted 5 years ago
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HEXO Corp. HEXO is expected to release third-quarter fiscal 2019 results on Jun 12, before market opens. Inorganic expansion and innovation are expected to show on the quarterly results.

The company delivered an earnings surprise of 33.3% in the last reported quarter.

Which Way Are Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate is pegged at a loss of 4 cents. The same for revenues stands at $11 million.

Let’s see how things are shaping up prior to the earnings release.

HEXO Corp. Price and EPS Surprise

 

HEXO Corp. Price and EPS Surprise
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HEXO Corp. price-eps-surprise | HEXO Corp. Quote

Factors to Consider

HEXO Corp’s expansion initiatives are expected to have ramped up revenues in the fiscal third quarter.

Notably, the company’s recent 1,000,000 sq. ft. greenhouse expansion is expected to boost results, leading to an annual production capacity of 108,000 kg of dried cannabis annually.

Additionally, the cannabis company entered into a syndicated credit facility earlier this year, the proceeds from which will be used in part to fund projects and initiatives.

Moreover, HEXO Corp has been eyeing inorganic expansion through acquisitions and agreements.

Earlier this year, the company took over Newstrike Brands, which is expected to help produce 150,000 kg of high-quality cannabis annually with access to four cutting-edge production campuses. Apart from this, the buyout will enable diversified domestic market penetration with combined distribution agreements.

Also, HEXO Corp currently has supply agreements in Quebec, British Columbia and Ontario, and a strategic investment in the private cannabis retailer Fire & Flower. The company has also entered into an agreement with Molson Coors Canada creating Truss, a joint venture to develop and distribute non-alcoholic cannabis-infused beverages.

We expect these developments to have influenced third-quarter revenues positively.

However, intense competition from the likes of Aurora Cannabis ACB in the medical marijuana space is likely to build pressure on pricing.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. However, this is not the case here.

Earnings ESP: HEXO Corp has an Earnings ESP of -10.35%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: HEXO Corp carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks With Robust Q1 Show

Here are two stocks that have reported solid results this earning season:

Stryker Corporation SYK delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate. The stock carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA Inc. XRAY reported adjusted earnings per share of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. Revenues totaled $946.2 million and surpassed the Zacks Consensus Estimate of $917.1 million. The stock carries a Zacks Rank #2.

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