Jefferies doesn't buy into the idea that Diamond had to manipulate earnings in order to get the Pringles deal done but it did say that "the longer the investigation takes the less confident we get that the company will maintain its FY11 earnings."
Diamond has forecast non-GAAP earnings of $3.05 to $3.15 per share for fiscal 2012 ending in July with sales projected between $1.85 billion and $1.95 billion. The current average estimate of analysts polled by Thomson Reuters is for a profit of $2.90 a share on sales of $1.18 billion for the year, reflecting Wall Street's skepticism. Since the prior guidance was based on the Pringles deal closing in the first half of December, a revision from the company is likely forthcoming.
Wednesday's session low of $26.94 brought Diamond shares down to levels unseen since September 2009.
The deal for Pringles was originally announced in April with the transaction said to be worth $2.35 billion. That value, however, was based on a swap of 29.1 million Diamond shares with a then-estimated worth of $1.5 billion, and the assumption of $850 million in Pringles debt. Diamond's stock was trading in the high $50-low $60 range back then though, raising the possibility a restructuring of the deal may be necessary to complete the transaction.--Written by Michael Baron in New York.
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