Consumer Products

Is Diamond Foods Turnaround Finally Afoot?

Diamond Foods Inc. (NASDAQ: DMND) reported its earnings Thursday after the market closed. The company’s shareholders are almost certainly hoping that these earnings can bolster its turnaround position. 24/7 Wall St. is taking a look here at how the 2015 guidance will value this company’s ongoing turnaround.

The company reported -$0.06 in earnings per share and $219.1 million in revenues for the fourth quarter. The average of Wall Street analyst estimates was $0.13 in earnings per share.

The fourth-quarter net sales for its Snacks segment increased to $130.1 million, or 11.1%. The gross profit for this segment was $44.9 million, or 34.5% of net sales. On the year, this segment posted net sales of $473.7 million with a gross profit of $168.6 million. Diamond Foods reported that its fourth-quarter net sales for its Nuts segment increased to $88.9 million, or 7.5%, with a gross profit of $4.4 million. The net sales for the year were $391.5 million, and it had a gross profit of $39.7 million.

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Diamond Foods offered up annual adjusted EBITDA guidance for fiscal year 2015 in the range of $115 million to $123 million. The company expects input cost inflation in the range of 3% to 4% and productivity in the range of 2% to 3%. Non-GAAP earnings are expected to be in the range of $0.90 to $1.10 per share, based on 31.9 million fully diluted shares outstanding, stock based compensation of $9.7 million and a non-GAAP effective tax rate of approximately 24%. Unfortunately, the consensus estimate from Thomson Reuters was $1.18 per share.

Using the $1.00 per share as a mid-point estimate, Diamond Foods is still valued at 26 to 27 times forward earnings for this current fiscal year. That is far from cheap, but investors still likely have the memory that Diamond Foods was on its way to becoming a $100 stock in 2011, before all the company’s woes crushed this stock down to as low as about $15 in late 2012 and early 2013.

Diamond Foods saw its shares rise handily on the open on Friday — they were at $28.15 after closing at $26.62. The stock has a consensus analyst price target of $33.17, and it has a 52-week trading range of $20.22 to $35.58. It has a market cap of roughly $835 million.

Brian J. Driscoll, president and CEO of Diamond Foods, had this to say about the fourth quarter earnings:

We are pleased by our topline performance this quarter with strong growth in the Snack and Nut segments, driven primarily by distribution and market share gains. At the same time cost inflation adversely impacted gross margin in the quarter, including tree nut cost increases and higher logistics expenses. We have taken measures designed to counter these cost increases and to improve gross margins going forward.

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