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Can Product Innovation Aid OrganiGram (OGI) in Q2 Earnings?

Zacks Equity Research

OrganiGram Holdings Inc. OGI is slated to release second-quarter fiscal 2020 results on Apr 14, before market open.

In the last reported quarter, the company registered a loss of 2 cents per share, whereas the Zacks Consensus Estimate was pegged at a loss of 3 cents.

Let’s take a look at how things are shaping up prior to this announcement.

Key Catalysts

Similar to the last reported quarter, OrganiGram is expected to have gained from a deepened focus on building its brand equity, ongoing product research and development to introduce innovative and differentiated products, and leading cultivation and manufacturing practices.

Organigram Holdings Inc. Price and EPS Surprise


Organigram Holdings Inc. Price and EPS Surprise

Organigram Holdings Inc. price-eps-surprise | Organigram Holdings Inc. Quote

The company expects to have reaped benefits from its indoor facility, wherein it can better control consistency and quality, unlike greenhouses and outdoor grow operations. This is also expected to have helped it withstand pricing headwinds in the market. Further, OrganiGram received Health Canada’s approval for the licensing of the remaining 16 cultivation rooms in Phase 4B in December 2019. This is likely to have been realized in the fiscal second quarter and contributed positively to the company's top line.

OrganiGram released the first of its Cannabis 2.0 products, which include Trailblazer Spark, Flicker and Glow 510-thread Torch vape cartridges, in December 2019. Further, the company has started the shipping of the cartridges from the same period.

Moreover, OrganiGram has been continuing the rollout of its products under the portfolio of recreational adult-use cannabis, including vape pens and cannabis-infused chocolates. The company also secured exclusivity with Feather, which is a renowned cannabis vape pen company, in Canada. Following this, OrganiGram shipped the Feather technology-powered Edison vape pens across Canada in February 2020. All the above-mentioned factors are expected to have noticeably boosted the top-line number of the company in the fiscal second quarter.

Also, the continuation of retail store openings across Canada is expected to have resulted in the increased sale of recreational cannabis and contributed to the company’s revenues.

Overall, OrganiGram projects the fiscal second quarter to have improved significantly from the first quarter in terms of net revenues and adjusted gross margin. Revenue growth is envisioned to have been sequentially strong, banking on the company’s initiatives to adjust production mix for meeting demand based on consumer insights. Margin expansion is expected to have been aided by a rise in net revenues, including a higher proportion of wholesale revenues, and lower cost of sales as well as indirect production expenses.

Meanwhile, the Zacks Consensus Estimate for second-quarter fiscal 2020 adjusted loss of a penny suggests an improvement of 66.7% from the year-ago reported figure. The consensus mark for revenues is currently pegged at $20.52 billion.

What the Quantitative Model Predicts

Per our proven model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. But this is not the case here as you will see below.

Earnings ESP: OrganiGram has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Chemed Corporation CHE has an Earnings ESP of +1.78% and it currently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.03% and it sports a Zacks Rank of 1 at present.

DexCom, Inc. DXCM has an Earnings ESP of +143.90% and is a Zacks #2 Ranked stock.

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