Diamond Foods to Grow on Turnaround Strategies - Analyst Blog

By
A A A

On Jul 3, 2014, we issued an updated research report on Diamond Foods, Inc. ( DMND ).

The company recently posted its third-quarter fiscal 2014 adjusted earnings of 11 cents per share. Though earnings missed the Zacks Consensus Estimate of 16 cents, it registered 37.5% year-over-year growth.

Moreover, the company's top line climbed 3.2% year over year to $190.9 million, marginally surpassing the Zacks Consensus Estimate of $189.0 million. Robust performance at the Snacks division was offset by increased walnut prices that weighed on the Nuts segment's performance.

Diamond Foods' vertically integrated business model allows the company to quickly react to the market trends and exploit new opportunities. Moreover, the company's nut roasting facilities and patented glazing technologies provide a self-stable glazed nut for the mass market.

Also, the company is benefiting from its sustained cost-curtailment endeavors. We believe that the company's turnaround strategies such as improving price realization, lowering underperforming SKUs and reducing dependency on discount have placed it on the path to success, as evident from improved margins and earnings results for third-quarter fiscal 2014.

Additionally, Diamond Foods is focusing on gaining its lost market share through expansion of the existing product lines and introduction of new products in the United States. Management's strategic plan is based on providing higher-margin branded products at premium price points.

Further, we expect the company's future results to exhibit more sustained growth of its brands due to product innovation and differentiation, improved cost structure and revived relationship with walnut suppliers.

However, the company remains susceptible to near- term headwinds such as challenges related to procurement of walnut supplies and mending ties with growers. Furthermore, we remain skeptical about the company's performance going forward due to its highly leveraged balance sheet.

Diamond Foods currently has a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better-ranked retail stocks worth investing include The Hain Celestial Group, Inc. ( HAIN ) and Treehouse Foods, Inc. ( THS ) with a Zacks Rank #1 (Strong Buy) and Phibro Animal Health Corporation ( PAHC ), carrying a Zacks Rank #2 (Buy).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

DIAMOND FOODS (DMND): Free Stock Analysis Report

HAIN CELESTIAL (HAIN): Free Stock Analysis Report

TREEHOUSE FOODS (THS): Free Stock Analysis Report

PHIBRO ANIMAL (PAHC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DMND , HAIN , THS , PAHC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

75,031,044
  • $16.26 ▲ 0.31%
64,683,841
  • $99.76 ▲ 2.14%
44,561,744
  • $14 ▼ 6.23%
37,984,130
  • $27.93 ▲ 0.36%
36,148,020
  • $94.39 ▲ 1.49%
33,981,456
  • $22.93 ▼ 1.38%
33,971,527
  • $44.08 ▲ 1.03%
33,685,322
  • $76.95 ▲ 1.32%
As of 10/20/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com