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Diamond Foods Is Out of the Rough

Stocks in this article: DMND MDLZ CAG

Still, investors want assurances that Diamond management can sustain this momentum. The industry is still dealing with weak volumes and compressed margins. Diamond is due to report fiscal second-quarter earnings on Tuesday.

The Street will be looking for 8 cents in earnings per share on revenue of $216.7 million. This would represent close to a 2% revenue decline year over year. It would also signify that Diamond's growth struggle is slowing. Don't forget, the company reported a 9% decline in the December quarter.

On the flip side, earnings is expected to be 60% year over year. Amid all of the restructuring, this is the key number in the equation and the true driver of the stock. Companies with questionable pasts have to demonstrate efficiency improvements. Investors want to know that their bet is rightfully place.

Management's job is to demonstrate it can get the company back on a path to long-term profitability and as quickly as possible. Along those lines, next quarter's guidance will be crucial. Any signs pointing lower will deflate the Street's confidence.

For now, Diamond should benefit from the fact that expectations aren't exceptionally high. Still, the stock's recent gains do suggest investors no longer perceive management as delusional. But with the stock near 52-week highs, investors should hope that they're not the nutty ones.

At the time of publication, the author was long AAPL but held no position in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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