Cannabis equity analysts may need to revise their 2024 earnings estimates after first-quarter results from major multi-state operators (MSOs). According to a recent report by Viridian Capital Advisors, 10 MSOs surpassed EBITDA estimates by $37 million in the first quarter of 2024, indicating that initial projections may have been too conservative.

Q1 Results

The report highlights that, despite the $37 million EBITDA beat in Q1, analysts have only raised full-year estimates by $14 million. This adjustment indicates a lag in the analysts' response to the earnings performance.

"Analysts are again playing catch up, but thankfully, this time in the upward direction," Viridian's analysts wrote in an email.

Revenue Performance

The chart in the report shows the percentage revenue miss for the companies. Four of the companies missed their revenue estimates by amounts ranging from -0.09% for Curaleaf to -3.24% for Cannabist. In aggregate, the group beat revenue estimates by about 1.4%.

Cut Estimates Despite Beats

Despite the EBITDA beats, consensus 2024 estimates have been cut for six out of ten companies over the past month.

Three companies missed estimates, with the biggest miss from MariMed (OTC:MRMD), off by 10%.

The beats were generally more substantial with TerrAscend (OTC:TRSSF), Ascend (OTC:AAWH) and Green Thumb (OTC:GTBIF) turning in results that were over 5% better than estimates.

Jushi (OTC:JUSHF), Goodness Growth (OTC:GDNSF), and Trulieve (OTC:TCNNF) all beat EBITDA estimates by more than 25%. The group, in the aggregate, beat EBITDA estimates by $37 million (9.47%).

This discrepancy underscores the volatility and uncertainty within the cannabis sector.

Margin Projections

The report also addresses margin projections, noting that first-quarter margins were 26.65%, but full-year margins are now expected to be lower at 25.96%.

"The most significant driver of increased EBITDA was higher margins. Eight of the ten companies beat EBITDA margin estimates," reads the report. This means these companies have increased the percentage of sales they turn into profit after costs.

This seasonal trend, where the first quarter typically sees weaker margins, suggests that the full-year outlook might not align with initial quarterly performances. "First quarter margins have been lower than full-year margins for the last two years," Viridian Capital Advisors points out.

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