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Will Higher Expenses Dent Cronos' (CRON) Earnings in Q1?

Zacks Equity Research

A global cannabinoid company, Cronos Group CRON, is scheduled to report first-quarter results on May 9, 2019.

The growth potential in the cannabis industry is vast and this bodes well for Cronos Group.

In October 2018, Canada became the first G7 country and the second in line, worldwide, to legalize cannabis sales for adult recreational use.

Cronos Group’s portfolio includes Peace Naturals, which is a global health and wellness platform, and two adult-use brands — Cove and Spinach.

The company registered significant growth in the fourth quarter, driven by shipments to the Canadian adult-use market and increased cannabis oil revenues. This momentum should continue in the first quarter. The focus in the first quarter will primarily be on the C$2.4 billion investment from the Altria Group MO and other collaborations.

Altria’s investment will strengthen Cronos Group’s financial resources, and allow the latter to expand its product development and commercialization capabilities.

However, the quarterly results are likely to show an increase in operating expenses, driven by higher research and development expenses, talent acquisition and escalated professional and consulting fees due to various strategic initiatives, including the Altria investment. This, in turn, will dent the bottom line. Earnings missed expectations by 150.0% in the fourth quarter of 2018.

Cronos Group Inc. Price, Consensus and EPS Surprise


Cronos Group Inc. Price, Consensus and EPS Surprise | Cronos Group Inc. Quote

The Zacks Consensus Estimate stands at a loss of 3 cent on revenues of $4.90 million for the first quarter.

Investors will focus on collaborations and deals inked during the quarter. In March 2019, Cronos Group sold all of its approximately 19% equity interest in Whistler Medical Marijuana Corporation to Aurora Cannabis Inc. in an all-share transaction.

Zacks Rank & Stocks to Consider

Cronos Group currently carries a Zacks Rank #5 (Strong Sell).

Some other top-ranked stocks in the healthcare sector include Bristol-Myers Squibb Company BMY and Roche RHHBY, both carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bristol-Myers’ earnings per share estimates have increased from $4.78 to $5.03 for 2020 in the past 60 days.

Roche’s earnings per share estimates have increased from $2.35 to $2.40 for 2019 in the past 60 days.

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