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

Prior to Wednesday's earnings, Wrede, one of the few analysts maintaining coverage on Diamond Foods, detailed eight things to watch for in the company's earnings data dump.

Of most concern was be whether restatements will be in line with initial disclosures made by Diamond Foods's board, which they were. Diamond Foods indicated in February it would have to increase its 2011 costs of goods sold by $40 million and 2010 figures by $20 million - however restatements of $39.4 million and $17 million were less than initial forecasts.

Diamond Foods should also have a detailed explanation of the root cause of its accounting issues, Wrede noted. In a follow-up, the analyst seemed disappointed on that front. "DMND today did not provide any incremental details on the cause for the restatement but assured investors that the necessary steps were taken to prevent a repeat," Wrede wrote, in a note released on Thursday.

Wrede also highlighted clarity on when Diamond Foods will report fourth quarter 2012 earnings and those for the first quarter of 2013. Management did not provide an update on future earnings and, according to Wrede's understanding, the company has to file results by mid-December.

On the disappointing side, the company was unable to meet walnut volume thresholds to cancel Oaktree's warrants, raising the prospect of shareholder dilution.

Other issues Wrede highlighted were clarity on the company's future cost structure in its walnut and snacks businesses, and detail on the strength of its balance sheet given the prospect of shareholder lawsuits -- concerns left largely unaddressed in earnings.

While Diamond Foods appointed new board members, it did not disclose whether it has found a permanent CFO or give investors a sense of whether it will replace restructuring specialists who have taken the reins of the company with permanent executives.

Diamond Foods troubles began in February when an audit committee review of its finances found significant accounting inconsistencies for its walnut supplies, forcing the immediate suspension of its CEO Michael Mendes and CFO Steven Neil. The review also cast doubt on the accuracy of two years' worth of earnings statements, and delayed three quarters of earnings filings.

For more on Diamond Foods, see how it choked on Pringles.

-- Written by Antoine Gara in New York
3 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
BAC $14.77 1.44%
DMND $37.56 0.97%
HSY $93.72 0.66%
OAK $47.86 -0.93%
AAPL $93.64 -0.11%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs