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Should SNDL (SNDL) be in Your Portfolio Ahead of Q1 Earnings?
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SNDL Inc. (SNDL - Free Report) is expected to release first-quarter 2024 results on May 9, before the opening bell.
The company posted a loss of 22 cents per share in the last reported quarter, wider than the Zacks Consensus Estimate of a loss of 12 cents.
Let us delve into the fundamental strength of SNDL ahead of its first-quarter results.
Factors Driving Q1 Earnings
An important tactical step for SNDL in 2023 was the acquisition of Valens, which improved its upstream cannabis capabilities in Canada. The company continues to advance automation and labor efficiencies while possessing manufacturing capabilities in all key product categories. Integrating Valens' operations into SNDL’s infrastructure resulted in annualized cost savings of over $22 million. We believe this to have made a positive contribution to SNDL’s profitability in the first quarter of 2024.
During fourth-quarter 2023, SNDL stated that the total store count remained steady at 170, with 12 Wine and Beyond, 20 Liquor Depot and 138 Ace Liquor Discounter outlets. The company also stated that the success of its Kelowna, Dilworth branch, which bolstered revenues by 20% year on year, demonstrates the influence of the Wine and Beyond banner and new market. We expect the company to once again deliver positive sales growth across various stores through its first-quarter 2024 results, adding to the top line.
As a crucial strategy for expansion, SNDL is always focused on improving its private label programs to increase profits while preserving the wide range of options that its clients expect. During the last reported quarter, SNDL mentioned that, anticipating further growth opportunities, the company officially launched proprietary data agreements for its liquor retail segment. Revenues from the segment will be reported in the first quarter of 2024.
Q1 Estimates
The Zacks Consensus Estimate for the company’s first-quarter 2024 revenues is pegged at $154.9 million, suggesting a 3.4% increase over the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for the company’s first-quarter 2024 loss per share of 4 cents is narrower than the loss of 7 cents in the year-ago reported quarter.
We believe that the scaled and diversified platform that SNDL has developed is a crucial factor in generating long-term shareholder value. SNDL activities include a wide range of manufacturing capabilities, liquor and cannabis retail banners that have won awards, and unique nonconsolidated exposure to U.S. cannabis operators. The company is currently monetizing certain real estate and credit assets that will support and bolster SNDL’s growth in the coming quarters.
Added to this, SNDL's financial stability puts it in a favorable position, especially when taking into account the larger Canadian cannabis sector environment. The company anticipates profiting from the financial instability of peers who will find it difficult to reliably deliver products to provincial boards and end customers on a profitable basis, given its debt-free, cash-rich balance sheet and lack of tax arrears. The cornerstones of the company’s strategy continue to be its constant commitment to quality and regulated products, as well as its unwavering consumer-centric approach.
SNDL believes that the cannabis operations segment will yield more operational efficiencies by 2024 and is enthusiastic about the prospects for expansion into both B2B and international markets.
Focused on improving margins, the company has continued to expand its liquor retail segment's solid base by expanding its private label offerings, improving inventory management procedures, and launching a data program. Within the cannabis retail division, SNDL also achieved record performance in terms of sales, gross profit and cash flow in the past few quarters. The upside reflects its ongoing attempts to expand margins and improve its data programs, thus enhancing the company’s profitability in the coming years.
SNDL embraced a ‘fewer, bigger, better’ approach, which has led to a decrease in the overall number of SKUs. This enabled the company to focus more on important customer segments. Record depletion rates and greater approval of new SKUs by the provincial board are indications of its improved innovation. It is also in a position to further benefit from revenue and margin growth in the upcoming quarters owing to significantly lower overhead expenses and increases in cultivation yield.
Stock Outperforms Industry
Through the fiscal first quarter, SNDL outperformed the industry in terms of share price performance. The stock rose 22.3% compared with the industry’s 7.5% growth.
Image Source: Zacks Investment Research
Bullish Trajectory Ahead
Estimates for SNDL’s 2024 loss have narrowed to 5 cents from 9 cents in the past 90 days. For 2025, SNDL’s estimates for EPS have moved up from 2 cents to 4 cents.
On a more optimistic note, the Zacks Consensus Estimate shows a 3.2% rise for the company’s 2024 revenues from the 2023 comparable figure, while 2025 shows an increase of 11.6% year over year.
Our Take
Given the upside mentioned above, we conclude that SNDL is a buy ahead of its first-quarter results as earnings estimate revisions continue to rise for both 2024 and 2025.
The significant decrease in overhead expenses, coupled with the improvements in cultivation yield, positions SNDL to capitalize on revenue and margin expansion in the coming quarters. The company will continue to focus on increasing its reach and accessibility, mainly through digital and e-commerce channels. Strong prospects of the cannabis operations segment will likely yield more operational efficiencies in the coming years, driven by expansion into B2B and international markets.
Hence, SNDL seems to be a good stock pick for investors.
Other Stocks to Consider
Here are some other medical stocks worth considering.
Gritstone bio, Inc. (GRTS - Free Report) , carrying a Zacks Rank of 2, has an estimated growth rate of 20.8% for 2024.
Gritstone’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.1%.
Erasca, Inc. (ERAS - Free Report) carries a Zacks Rank of 2. ERAS has an estimated long-term growth rate of 37.5%.
Erasca’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 17.6%.
Alcon (ALC - Free Report) carries a Zacks Rank of 2. ALC has an estimated long-term growth rate of 12.8%.
Alcon’s earnings surpassed estimates in three out of the trailing four quarters and missed in one, the average surprise being 7.4%.
Image: Bigstock
Should SNDL (SNDL) be in Your Portfolio Ahead of Q1 Earnings?
SNDL Inc. (SNDL - Free Report) is expected to release first-quarter 2024 results on May 9, before the opening bell.
The company posted a loss of 22 cents per share in the last reported quarter, wider than the Zacks Consensus Estimate of a loss of 12 cents.
Let us delve into the fundamental strength of SNDL ahead of its first-quarter results.
Factors Driving Q1 Earnings
An important tactical step for SNDL in 2023 was the acquisition of Valens, which improved its upstream cannabis capabilities in Canada. The company continues to advance automation and labor efficiencies while possessing manufacturing capabilities in all key product categories. Integrating Valens' operations into SNDL’s infrastructure resulted in annualized cost savings of over $22 million. We believe this to have made a positive contribution to SNDL’s profitability in the first quarter of 2024.
During fourth-quarter 2023, SNDL stated that the total store count remained steady at 170, with 12 Wine and Beyond, 20 Liquor Depot and 138 Ace Liquor Discounter outlets. The company also stated that the success of its Kelowna, Dilworth branch, which bolstered revenues by 20% year on year, demonstrates the influence of the Wine and Beyond banner and new market. We expect the company to once again deliver positive sales growth across various stores through its first-quarter 2024 results, adding to the top line.
As a crucial strategy for expansion, SNDL is always focused on improving its private label programs to increase profits while preserving the wide range of options that its clients expect. During the last reported quarter, SNDL mentioned that, anticipating further growth opportunities, the company officially launched proprietary data agreements for its liquor retail segment. Revenues from the segment will be reported in the first quarter of 2024.
Q1 Estimates
The Zacks Consensus Estimate for the company’s first-quarter 2024 revenues is pegged at $154.9 million, suggesting a 3.4% increase over the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for the company’s first-quarter 2024 loss per share of 4 cents is narrower than the loss of 7 cents in the year-ago reported quarter.
SNDL Inc. Price and EPS Surprise
SNDL Inc. price-eps-surprise | SNDL Inc. Quote
Zacks Rank: The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Glamorous Long-Term Picture
We believe that the scaled and diversified platform that SNDL has developed is a crucial factor in generating long-term shareholder value. SNDL activities include a wide range of manufacturing capabilities, liquor and cannabis retail banners that have won awards, and unique nonconsolidated exposure to U.S. cannabis operators. The company is currently monetizing certain real estate and credit assets that will support and bolster SNDL’s growth in the coming quarters.
Added to this, SNDL's financial stability puts it in a favorable position, especially when taking into account the larger Canadian cannabis sector environment. The company anticipates profiting from the financial instability of peers who will find it difficult to reliably deliver products to provincial boards and end customers on a profitable basis, given its debt-free, cash-rich balance sheet and lack of tax arrears. The cornerstones of the company’s strategy continue to be its constant commitment to quality and regulated products, as well as its unwavering consumer-centric approach.
SNDL believes that the cannabis operations segment will yield more operational efficiencies by 2024 and is enthusiastic about the prospects for expansion into both B2B and international markets.
Focused on improving margins, the company has continued to expand its liquor retail segment's solid base by expanding its private label offerings, improving inventory management procedures, and launching a data program. Within the cannabis retail division, SNDL also achieved record performance in terms of sales, gross profit and cash flow in the past few quarters. The upside reflects its ongoing attempts to expand margins and improve its data programs, thus enhancing the company’s profitability in the coming years.
SNDL embraced a ‘fewer, bigger, better’ approach, which has led to a decrease in the overall number of SKUs. This enabled the company to focus more on important customer segments. Record depletion rates and greater approval of new SKUs by the provincial board are indications of its improved innovation. It is also in a position to further benefit from revenue and margin growth in the upcoming quarters owing to significantly lower overhead expenses and increases in cultivation yield.
Stock Outperforms Industry
Through the fiscal first quarter, SNDL outperformed the industry in terms of share price performance. The stock rose 22.3% compared with the industry’s 7.5% growth.
Bullish Trajectory Ahead
Estimates for SNDL’s 2024 loss have narrowed to 5 cents from 9 cents in the past 90 days. For 2025, SNDL’s estimates for EPS have moved up from 2 cents to 4 cents.
On a more optimistic note, the Zacks Consensus Estimate shows a 3.2% rise for the company’s 2024 revenues from the 2023 comparable figure, while 2025 shows an increase of 11.6% year over year.
Our Take
Given the upside mentioned above, we conclude that SNDL is a buy ahead of its first-quarter results as earnings estimate revisions continue to rise for both 2024 and 2025.
The significant decrease in overhead expenses, coupled with the improvements in cultivation yield, positions SNDL to capitalize on revenue and margin expansion in the coming quarters. The company will continue to focus on increasing its reach and accessibility, mainly through digital and e-commerce channels. Strong prospects of the cannabis operations segment will likely yield more operational efficiencies in the coming years, driven by expansion into B2B and international markets.
Hence, SNDL seems to be a good stock pick for investors.
Other Stocks to Consider
Here are some other medical stocks worth considering.
Gritstone bio, Inc. (GRTS - Free Report) , carrying a Zacks Rank of 2, has an estimated growth rate of 20.8% for 2024.
Gritstone’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.1%.
Erasca, Inc. (ERAS - Free Report) carries a Zacks Rank of 2. ERAS has an estimated long-term growth rate of 37.5%.
Erasca’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 17.6%.
Alcon (ALC - Free Report) carries a Zacks Rank of 2. ALC has an estimated long-term growth rate of 12.8%.
Alcon’s earnings surpassed estimates in three out of the trailing four quarters and missed in one, the average surprise being 7.4%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.