Cresco Labs' stock rallies as cannabis company swings to a profit

By Steve Gelsi

Cresco Labs and Ayr Wellness both beat analyst estimates for Q4 revenue

Cresco Labs Inc.'s stock rallied Wednesday after the Chicago-based cannabis company said it swung to a fourth-quarter profit on stronger-than-expected revenue.

Cresco Labs (CRLBF) said it earned $4.87 million in the three months that ended Dec. 31. The company did not provide a figure for earnings per share.

The FactSet analyst consensus estimate was for a loss of 2 cents a share.

In the year-ago quarter, Cresco Labs reported a loss of $180.62 million.

Fourth-quarter revenue fell to $188.24 million, from $199.58 million in the year-ago quarter. Cresco Labs beat the consensus analyst estimate for revenue of $181.7 million.

"Everything we did in 2023 was designed to prepare us to take advantage of the monumental opportunities ahead, including: maximizing our upcoming adult-use catalysts, capitalizing on our brands and winning with independents, and expanding our retail to provide the consumer with the best cannabis experience possible," Cresco Labs Chief Executive Charles Bachtell said.

The company also said it continues to hold No. 1 market-share positions in Illinois, Pennsylvania and Massachusetts.

Cresco Labs' stock jumped 10.3% in afternoon trade to $1.72 a share.

Prior to Wednesday's moves, Cresco Labs shares had risen 15.1% in 2024, compared with a 5.9% increase by the AdvisorShares Pure U.S. Cannabis exchange-traded fund MSOS.

Meanwhile, Ayr Wellness Inc.'s stock (AYRWF) jumped by 8% after the company said its fourth-quarter loss narrowed to $9.5 million, from a year-ago level of $143.1 million.

Revenue at Miami-based Ayr Wellness rose by 0.4% to $114.8 million, above the FactSet consensus estimate of $114.5 million.

Ayr Wellness also said it completed the deferral or retirement of nearly $400 million of debt maturities in February, a move that gives it "a clear financial runway to focus on our optimization efforts as we look to capitalize on multiple industry catalysts ahead," Chief Executive David Goubert said.

Ayr Wellness said it is positioning its assets in Florida, Pennsylvania and Ohio to "take full advantage" of the anticipated adult-use transition in those states from a medical market. Of the three states, only Ohio has approved recreational cannabis use, though Florida may hold a ballot referendum in the fall.

Looking ahead, Ayr Wellness expects its first-quarter revenue to be flat to slightly up from the fourth quarter's figure of $114.8 million. Currently, analysts are looking for first-quarter revenue of $118.7 million.

Goubert said Ayr Wellness expects to get a boost from growth in its wholesale cannabis business, as well as adult-use sales in Ohio. Only 15 of its 91 dispensaries operate adult-use sales operations, which typically generate more robust sales than medical-use sales.

If more states come online with adult-use markets, Ayr Wellness may benefit by flipping its medical dispensaries into retail locations, Goubert noted.

Also read: Cannabis stocks rise after President Biden mentions plant in State of the Union speech

-Steve Gelsi

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03-13-24 1530ET

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