Aurora Cannabis earnings: When does pot profit actually arrive?

Aurora Cannabis Inc. is expected to report fiscal fourth-quarter earnings Wednesday after the closing bell. The company says it will host a conference call at 9 a.m. Eastern time Thursday.

Earnings: Analysts expect adjusted earnings per share of C$0.047 and unadjusted earnings of C$0.059, according to Bloomberg. Aurora has said it expects positive fourth-quarter earnings before interest, taxes, depreciation and amortization adjusted for items such as biological asset transformation, among other things. But in the company’s August guidance, it no longer stated that it expects positive Ebitda in the fourth quarter, only that it is “on track” to hit the target in the future.

Revenue: Analysts surveyed by FactSet expect Aurora to report revenue of C$108 million ($82.1 million) net of excise taxes, versus C$19.1 million in the year-ago period. Aurora reported fiscal third-quarter sales of C$65.1 million. In August, Aurora said it expects fourth-quarter revenue of between C$100 million and C$107 million.

Stock movement: In the past three months, Aurora stock ACB, +4.49%ACB, +4.30% has fallen 22.8%, as the S&P 500 index SPX, +0.03% has gained 3.2%

Of the 17 analysts that cover Aurora, nine rate the company the equivalent of a buy rating, six have a hold and two rate the name a sell. The average target price is C$12.57, which represents nearly a 60% upside from Monday’s closing price.

Aurora’s early-August revenue guidance came in below analysts’ expectations for the fourth quarter, which GMP Securities analyst Ryan Macdonell believes stems from harvests arriving too late to be processed and sold during the fiscal fourth quarter. Macdonell also expects the company is holding back some inventory to prepare for the launch of edibles in Canada in December.

The analyst wrote that Aurora previously hit the upper range of its revenue guidance and he expects the company to do the same for the fourth quarter. Macdonnell has a buy rating on the stock with a C$15 target price.

Cowen analyst Vivien Azer, who has a C$15 target price and rates the stock the equivalent of a buy, wrote in an August note to clients that she expects Aurora will report stronger-than-expected crop yields for its cannabis and a resulting improved cash cost per gram. In the note, Azer wrote that she expects the company to continue to progress to per-gram cash costs of lower than C$1.

“We note that the revenue guide comes in below both our and Street estimates, although we do not consider this a significant surprise given the level of reported monthly retail sales coming from Statistics Canada. Given [Aurora’s] strong production output, we would look for this to translate to strong revenue growth in [fiscal 2020], particularly as new product form factors come online in late-[second quarter] as well as continued brick and mortar rollout.”

Aurora also recently sold its stake in Green Organic Dutchman Holdings Ltd. TGODF, -6.23%TGOD, -6.16%, which it acquired in 2018. Aurora Chief Corporate Officer Cam Battley stepped down from Dutchman’s board last fall. According to Seaport Global analyst Brett Hundley, the transaction generated C$86.5 million, which he said would pad Aurora’s cash reserves as it “continues to build out its cultivation and processing footprint.”

In the past, Aurora’s investments have generated significant swings in paper profits and losses, depending on market conditions during previous quarters.

See also: Canopy Growth’s remaining CEO talks about pot company’s shake-up, and the search for his replacement

Stifel analyst W. Andrew Carter initiated coverage of Aurora in June, setting a $10 price target and rating the stock a hold. Carter wrote in the initiation note that his team is taking a more “cautious approach” to the stock because of a less optimistic view of the global medical-use market outside of Germany and Canada — which Aurora is making a significant bet on — and difficulty the company faces expanding into the U.S.

Like several of the largest cannabis producers in Canada, Aurora has also accumulated billions in goodwill on its balance sheet — the result of acquisitions leading up to federal legalization in Canada. Large goodwill impairment charges are one potential result of the accumulation.

Carter called Aurora’s expansion in the Canadian market "expensive,” referring to the company’s acquisition of MedReleaf and CanniMed for a total of C$4.3 billion, most of which was paid for with the company’s paper. Beyond the acquisitions, Carter’s team estimates that Aurora will need to spend an additional C$300 million to C$400 million in capital expenditures to complete its Canada infrastructure investments. The significant cash demand will require “consistent open access to the capital markets,” he said.

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