This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Diamond Foods Valuation Under Pressure

NEW YORK ( TheStreet) -- After nearly a year of keeping investors in the dark, Diamond Foods (DMND) reported 2012 quarterly earnings and restatements to the company's 2010 and 2011 annual earnings, which help to put accounting issues behind the snack maker, but raise new questions about the company's valuation and growth outlook.

In a set of earnings released after the market close, Diamond Foods, the maker of Emerald Nuts, Pop Secret and Kettle Chips snacks, said that restatements to previous years earnings were less than a February audit committee review of the firm's accounting practices indicated.

While senior management stressed that the long overdue earnings put to rest many of the accounting issues lingering over the firm, the company's 2012 earnings came well short of expectations and raise the prospect that a late May recapitalization by distressed debt fund Oaktree Capital (OAK - Get Report) will dilute shareholders.

For the first three quarters of 2012, Diamond Foods reported a net loss of $53.4 million or $2.46 a share, as new arrangements with the company's walnut suppliers and overhead costs cut at the company's bottom line.

Because walnut supply costs ran higher than optimistic terms laid out in Oaktree Capital's $225 million late May loan, Diamond Foods was unable to acquire the walnut volumes to trigger a redemption of $10 warrants in the company's stock that represent 16.4% of its outstanding shares, and may cause common investors to be diluted at discount prices.

Meanwhile, Diamond Foods's higher costs imply a new growth profile for the San Francisco-based company, and an initial outlook provided by management of up to $980 million in full-year 2012 revenue and $81 million in earnings before interest, taxes depreciation and amortization project near 30% year-over-year declines.

The mix of a leaner profitability outlook and the prospect that Oaktree Capital will be able to convert its warrants at discount prices sent Diamond Foods shares to new lows since its accountancy issues came to a head in February.

In early Thursday trading, Diamond Foods shares were off over 22% to $15.20, a new five year low in the company's stock.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DMND $37.56 0.97%
BAC $14.80 0.03%
HSY $91.66 0.00%
OAK $47.66 0.00%
AAPL $95.03 0.21%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs