Diamond Foods Inc.
) fell 9.33% in yesterday's after-hour trading session after the
company announced lower-than-expected bottom-line results for the
third quarter of fiscal 2014. The company's quarterly adjusted
earnings per share of 11 cents fell short of the Zacks Consensus
Estimate of 16 cents per share. However, the company registered
year-over-year earnings growth of 37.5% in the quarter.
The results were primarily attributable to strong sales performance
and margin expansion at the company's Snacks segment, partly offset
by weak performance at its Nuts segment.
Further, including one-time items, the company reported loss per
share of $3.63 during the quarter against a loss of 71 cents in
third-quarter fiscal 2013.
Quarter in Detail
Total sales for the reported quarter were $190.9 million, up 3.2%
from $184.9 million recorded in the year ago comparable quarter.
The top line marginally surpassed the Zacks Consensus Estimate of
$189 million. Robust performance at the Snacks division was offset
by increased walnut prices that weighed on the performance of the
Net sales at the company's Snacks segment increased 9.6% to $114.3
million while at the Nuts segment net sales fell 5.0% to $76.6
Gross profit for the quarter increased 3.9% year over year to $45.1
million from $43.4 million in the year-ago quarter. Gross margin
increased 20 basis points (bps) to 23.6% from 23.4% in the
year-earlier quarter. The rise in gross margin was mainly driven by
strong performance at the Snacks division owing to better price
Gross profit at Diamond Foods' Snacks segment increased 13.6% year
over year to $41.7 million while as a percentage of sales, it
improved 130 bps to 36.5%. At the Nuts segment, gross profit
declined 49.3% to $3.4 million and gross margin contracted 390 bps
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) in the quarter came in at $23.5 million
versus $23.2 million in the year-ago comparable quarter. Adjusted
EBITDA margin contracted 20 bps to 12.3%.
Diamond Foods ended third-quarter fiscal 2014 with cash and
availability of $127.2 million compared with $74.4 million
available at the end of second quarter fiscal 2014. As of Apr 30,
2014, net debt outstanding was $635.4 million while the company had
$125 million undrawn under the ABL Revolver.
Fiscal 2014 Guidance
Despite commodity costs' pressure on its Nuts division, Diamond
Foods expects adjusted EBITDA to improve year over year in fiscal
2014, based on the impact of its ongoing multi-year turnaround
Other Stocks to Consider
Currently, Diamond Foods has a Zacks Rank #4 (Sell). Better-ranked
stocks in the food industry include
B&G Foods Inc.
The Hain Celestial Group Inc.
Inventure Foods Inc.
). All of these stocks carry a Zacks Rank #2 (Buy).
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