Salvation For Diamond Foods, Perhaps (DMND, PG)

KeyBanc Capital Market’s Akshay Jagdale has issued a report calling the accounting probe as being unlikely to show that any substantial wrongdoings were made.  The firm also believes that the review will be wrapped up quickly showing that it properly accounted for payments to walnut growers.  This feels like it has a chance of becoming one of those research calls that will make or break an analyst career.  It is at a minimum going to be beconsidered to be a highly controversial call based upon the trading history and based upon the move seen in the stock today. 

What is more important than anything is that the call is for Diamond Foods to proceed with its $2.35 billion acquisition of Pringles from Procter & Gamble (NYSE: PG).

Investors need to consider that no announcement has been made by the company itself.  Diamond Foods now likely wants to wait until it can show every detail to the powers that be before saying a word.  Because of the accounting review, there is no way to offer up any consensus estimates that would yield an accurate forward P/E.

This stock had been down a whopping 70% from its peak and the director’s suicide was more than concerning.  To show how enthusiastic the street is the stock is up literally 31% this morning at $34.86 after a $26.55 close on Friday.  The 52-week trading range is $26.37 to $96.13.  We will be updating the pricing on this one throughout the trading day.

JON C. OGG