NEW YORK ( TheStreet) - Following its brutal September quarter, in which Diamond Foods ( DMND) not only missed earnings but offered a gloomier-than-expected outlook, shares of the beleaguered snack food giant fell 17%. This is even though management had surprised the Street with a 9-cents-per-share profit that easily beat consensus estimates that called for a 3-cent loss.
As is often the case for companies with a history of disappointing the Street, investors looked beyond the earnings beat and immediately focused on the next quarter. Unfortunately, though, management had nothing good to say.
The company, whose products include PopSecret popcorn, Kettle chips and Emerald snack nuts, said of the December quarter that it expected "significant sales and contribution headwinds." Management had cited its nuts business, which it planned to relaunch after an accounting scandal last year regarding improper payments to walnut growers.
But on a relative basis, I never believed that Diamond's "matter of fact" speaking or its outlook was any different from the cautiousness projected by other packaged food companies like ConAgra (CAG). Essentially, management was being punished not only for its poor history of execution, but also for its propensity for self-inflicted wounds due to poor internal controls. So, suffice it to say, Diamond had a laundry list of deficits to repair.
Fast-forward three months later, it looks as if the company's recent changes aimed at cleaning up its operations, including installing a new chief financial officer, has begun to pay off -- albeit slightly. Last week shares climbed 7%. This is even though revenue dropped 9% year over year. But in an environment that has been ravaged by weak prices and poor volumes, not much was expected.