Diamond Foods Inc.
) fell 2.73% in the after-hours trading session as the company
posted a 25% decline in its first-quarter fiscal 2014 earnings
due to continued challenges in walnut supply and higher Emerald
re-launch costs. However, quarterly earnings of 18 cents per
share rose considerably from the Zacks Consensus Estimate of 14
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Including one-time items, the company reported a loss of $1.92
per share during the quarter against a loss of 49 cents in the
first-quarter of fiscal 2013.
Quarter in Detail
Total sales for the reported quarter were $234.7 million, down
9.2% from $258.5 million recorded in the year-ago comparable
quarter. The top line also missed the Zacks Consensus Estimate of
$241.0 million. The decline in total sales was mainly due to weak
performance at the company's Nuts segment, partially offset by
improved sales at the Snacks segment.
Net sales at the company's Snacks segment reflected a marginal
1.2% increase to $112.3 million, while the Nuts segment net sales
fell 17.1% to $122.1 million.
Gross profit for the quarter inched down 1.0% year over year to
$57.9 million compared with $58.5 million in the year-ago
quarter. Nevertheless, gross margin expanded 200 basis points
(bps) to 24.7% compared with the year-ago quarter's gross margin
of 22.7%. The expansion in gross margin resulted from better
price realization, effective cost management and enhanced
productivity at the company's operating segments.
Gross profit at Diamond Foods' Snacks segment increased 2.9% year
over year to $39.4 million, while as a percentage of sales it
improved 60 bps to 35.0%. Gross profit at Diamond Foods' Nuts
segment dipped 8.9% to $18.5 million, whereas gross margin
expanded 140 bps to 15.2%.
Selling, general and administrative (SG&A) expenses escalated
48.1% year over year to $56.6 million, including $23.5 million
primarily related to the cost of settling the securities class
action litigation as announced on Aug 21. Advertising expenses
rose 18.9% to $10.7 million from $9.0 million in the year-ago
Adjusted EBITDA in the quarter came in at $29.1 million compared
with $31.0 million in the year-ago comparable quarter.
Diamond Foods ended first-quarter fiscal 2014 with cash &
availability of $85.3 million under its total revolving credit
facility. As of Oct 31, 2013, net debt was $583.0 million,
including the Oaktree notes.
Fiscal 2014 Outlook
Diamond Foods expects adjusted EBITDA to improve year over year
in fiscal 2014, primarily benefiting from the implementation of
its ongoing multi-year turnaround initiatives. Moreover, the
company expects year-over-year earnings improvement through the
rest of fiscal 2014.
Further, the company remains on track to achieve its targeted
cost savings of $35 - $40 million through fiscal 2013 and 2014,
driven by improved procurement and manufacturing output as well
as continued effort to lower costs.
Other Stocks to Consider
Currently, Diamond Foods has a Zacks Rank #3 (Hold).
Better-ranked stocks in the specialty food industry include
Omega Protein Corp.
Pinnacle Foods Inc.
ConAgra Foods Inc.
). Of these, Omega Protein has a Zacks Rank #1 (Strong Buy),
while Pinnacle Foods and ConAgra carry a Zacks Rank #2 (Buy).