On Jul 3, 2014, we issued an updated research report on
Diamond Foods, Inc. (
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%
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
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
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.
Treehouse Foods, Inc.
) with a Zacks Rank #1 (Strong Buy) and
Phibro Animal Health Corporation
), carrying a Zacks Rank #2 (Buy).
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DIAMOND FOODS (DMND): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
TREEHOUSE FOODS (THS): Free Stock Analysis
PHIBRO ANIMAL (PAHC): Free Stock Analysis
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