How’s CannTrust’s Bottom Line Expected to Fare in 4Q?

Net income

CannTrust (CTST) is expected to report a positive gross income and EBITDA in the fourth quarter. However, the company is expected to report a net loss of nearly 11 million Canadian dollars in the fourth quarter. The company’s net income was 0.42 million Canadian dollars in the third quarter and 6.3 million Canadian dollars in the fourth quarter of 2017.

How’s CannTrust’s Bottom Line Expected to Fare in 4Q?

EPS

Since CannTrust is expected to report a loss in the fourth quarter, the company’s loss per share is expected to be 0.06 Canadian dollars. CannTrust had a flat EPS in the third quarter. The company’s EPS was 0.08 Canadian dollars in the third quarter of 2017.

Why a loss?

We can take a cue from HEXO (HEXO), which recently reported its second-quarter earnings. HEXO reported a loss during the quarter due to increased operating expenses. During the second quarter, HEXO’s operating expenses grew to 18.5 million Canadian dollars, which would roughly equal 1.4x what the company earned in sales during the quarter. The ratio was 4.6x in the second quarter of 2018. The general and administrative costs accounted for more than half of the company’s total operating expenses.

A steep operating expense also resulted in a net loss of 4.3 million Canadian dollars, which was lower than 8.9 million Canadian dollars in the second quarter of 2018.

The costs have also risen for companies (MJ) like Canopy Growth (WEED), Cronos Group (CRON), and Tilray (TLRY). The companies have invested heavily in expansion activities.