Diamond Foods stepped into fiscal 2015 with solid first-quarter
results wherein both top and bottom lines marked year-over-year
improvement. We observe that the company's turnaround strategies,
such as improving price realization, lowering underperforming SKUs
and reducing dependency on discounts, have helped it to stabilize
falling revenues as apparent from its sales performance. Moreover,
we expect its brands to exhibit more sustained growth in the future
driven by product innovation and differentiation as well as an
improved cost structure. However, we cannot ignore the near-term
headwinds such as challenges related to procurement of walnut
supplies and mending ties with growers. The company's highly
leveraged balance sheet also makes us skeptical about its future
performance. Thus, our Neutral recommendation on the stock remains
Headquartered in Stockton, CA, Diamond Foods Inc. is a specialty
food company focused on processing, marketing and distribution of
snack products and culinary, ingredient and in-shell nuts. Diamond
Foods reports its operating results under 2 segments Snacks and
Nuts. Snacks segment comprises the Kettle U.S., Kettle U.K. and Pop
Secret brands, while the Nuts segment includes the Diamond of
California and Emerald brands.
Diamond Foods products are sold in more than 60,000 retail
locations in the United States, and also overseas in more than 100
countries, primarily in Germany, Japan, Spain and Italy.
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