NEW YORK ( TheStreet) -- Known for its Kettle chips and Emerald snack nuts, snack-food company Diamond Foods (DMND) -- which has beaten Wall Street's earnings-per-share estimates in four straight quarters and eight out of the past nine -- can add "strong performer" to its list of descriptions.
Ahead of the release of the company's fiscal fourth-quarter results on Tuesday, it would seem investors are expecting Diamond's winning streak to continue, as evidenced by the stock's 8% gain in the past five days and 20% surge in the past month. Plus, with the Stockton, Calif.-based company announcing its Pop Secret brand premium popcorn is now the official popcorn of Walt Disney (DIS) - Get Report Resort in Florida and Disneyland Resort in California, Diamond, whose shares are up some 20% on year, is poised to shine in the quarters and years ahead.
The long-term partnership with Disney can give Diamond the sort of competitive positioning it needs against larger snack-food rivals such as Mondelez (MDLZ) - Get Report and especially PepsiCo (PEP) - Get Report, whose Frito Lay snack business remains the global leader in the salty category.
Although Diamond's revenue fell 2.5% in its fiscal third quarter, profit margins have begun to expand. In the third quarter, gross margins rose to 28.5% from 23.6% in the year-ago quarter, thanks to higher prices.
That means Diamond, which is cutting its capital expenses, has also picked up some pricing power, allowing it to beat Wall Street's EPS estimates -- reversing a loss in the year-earlier quarter -- even in periods of weak volume. And although the Diamond hasn't made any growth promises in terms of its Disney partnership, it's tough to bet against revenue and earnings climbing higher given Disney's market reach.
For the quarter that ended in August, analysts on average are estimating earnings of 21 cents a share on revenue of $210 million, which would translate into year-over-year EPS growth of 10% and a revenue decline of 4%.
And the while the company's stock isn't cheap at 24 times the fiscal 2016 earnings estimate of $1.27 a share, against a P/E 17 for the S&P 500 index, Diamond's shares, which have a consensus buy rating, can still be magical.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.