Tag Archives: Diamond Foods

Business, Finance, Occupation & Industry

Are You Nuts for Liking Diamond Foods?

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By Rich Duprey, The Motley Fool

DMND Revenue Quarterly YoY Growth Chart

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When a stock‘s share price is lower than a North Dakota thermometer in February, investors tend to give it the cold shoulder. But as fortunes change and the market warms to a stock‘s prospects, its price can heat up in a hurry. Unfortunately, it’s hard tell that a stock is melting investors’ hearts until after it’s made that upward leap.

Taking the market’s temperature
But using Motley Fool CAPS’ proprietary ratings, aggregated from the opinions of the 180,000-member-driven investor community, can help us find previously low-rated companies that recently enjoyed a bump in investor confidence. We can see whether they’re truly heating up — or headed back to the deep freeze.

Nut grower Diamond Foods is looking to put its recent ignominious past behind it, and investors are responding to the change, with even investment house BlackRock taking an 8% stake in the company. Since we’re all probably familiar with the accounting shenanigans that led Diamond to its low state, let’s see if the market is nutty for changing its outlook on this stock.

Caution: Contents may be hot
Although its hopes of becoming a major snack-foods company were dashed following the accounting brouhaha last year when it lost Procter & Gamble‘s Pringles business to Kellogg , that doesn’t mean Diamond has given up on the segment. It has two popular snack-food brands in the Kettle chip and PopSmart popcorn businesses, and those two were largely responsible for keeping last quarter from becoming a complete disaster.

Snack revenues jumped 7% to $105 million last quarter and now account for 48% of revenues, up from 37% last year. Although that’s predicated on the worsening situation in its nut business that saw sales tumble 30% to $115 million, Diamond remains intent on repositioning itself as a snack-foods company, particularly since it’s responsible for more than two-thirds of company profits.

Last summer, Diamond attempted to speed up market-share gains by engaging in a bit of promotional activity around the Kettle brand, only to have it backfire because it undermined the chip’s premium positioning. When the market researchers at Nielsen surveyed what consumers were buying in 2012, they found Kettle and Emerald sales actually declined because of it. The nut grower was forced to backpedal and reduce what it termed “inefficient discounting,” which fortunately helped sales rise.

DMND Revenue Quarterly YoY Growth data by YCharts.

Good intentions aside, getting Diamond to be more than just a gem in the rough isn’t going to be easy. Competition for limited consumer dollars is filled with a lot of sharp elbows following a period of consolidation in the industry.

Flowers Foods bought out Tasty Baking, J&J Snack Foods picked up several snack businesses, and Snyder’s-Lance — itself a product of a business combination — scooped up Snack Factory last year.

It was that trend of industry consolidation that had Diamond pursuing Pringles, and it would have made the company a formidable rival. As Kellogg’s …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

These Stocks Couldn't Maintain Momentum, Either

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By Rich Duprey, The Motley Fool

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All good things must come to an end. After seven straight days of gains, the S&P 500 finally lost four points. The Dow Jones Industrial Average, however, continued its string of up days, tacking on another three points to make it eight consecutive days of new highs.

As the Fool’s Jeremy Bowman pointed out the other day, a better economic outlook here at home is driving the market‘s euphoria while much of the rest of the world teeters on collapse. So don’t go running over the cliff with them like a bunch of lemmings: This could just be a temporary situation. Let’s first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Company

% Change

Diamond Foods

(9.7%)

Perfect World

(8.8%)

Yandex

(8%)

That’s nuts
Last week nut grower Diamond Foods surged higher on no apparent news, which I suggested would end up being a short-term phenomenon because there was no fundamental basis for the rise. That was borne out by yesterday’s crash after Diamond reported earnings that were only in line with analyst expectations.

Despite having lost the Pringles brand to Kellogg following its accounting shenanigans debacle that led to a restatement of its financials, it’s still apparent Diamond Foods wants to be a snack-food player. Starting with its second-quarter results, it’s reporting in two segments now: nuts and snacks. The latter saw revenues rise 7% to $105 million, while nut revenues plummeted almost 30% as volumes cratered 37% from the year-ago period.

Yet it could have been so much more. Kellogg reported fourth-quarter earnings last month showing net sales soaring 18%, as Pringles drove most of the gains. As I noted at the time, “Without the acquisition, sales growth still would have come in at 5.3%, its biggest gain in more than a year, but it shows what Diamond could have enjoyed had it won the brand.” The stock is down almost 12% now from its recent highs.

Game over?
Chinese Web games operator Perfect World also reported earnings the other day in line with expectations, but its outlook for the future is what sank the stock yesterday. It projected first-quarter sales to come in between 592 million yuan, or about $95 million at current exchange rates, to 619 million yuan, which is well below the 643 million yuan consensus estimate of analysts.

Management contends, though, that it’s investing in the future of its business, so that while it makes current-period results weaker than anticipated, it will pay off later on. Perfect World decelerated its in-game promotional activities and focused instead on its pipeline as well as content enhancements for its existing titles, but the market apparently didn’t buy into that argument.

I’ve noted on numerous occasions I’m not a fan of the free-to-play/pay-to-play-more online gaming business model, and I believe the moves by …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Diamond Foods' Shares Went Stale

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By Travis Hoium, The Motley Fool

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Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of snack maker Diamond Foods fell 10% today after reporting earnings.

So what: Fiscal second quarter revenue fell 16% to $220.8 million, which was short of the $239.2 million analysts expected. On the bottom line, net income was $10.1 million, or $0.43 per share, but when you pull out one-time items the profit falls to $0.05 per share, a penny below expectations.  

Now what: The most concerning part of the report was the company’s huge drop in revenue. Shares are trading at 21 times forward earnings, a price that’s steep even for a company that’s growing revenue at a good clip. I don’t see a reason to buy shares here and would wait to re-evaluate until the company turns revenue around.

Interested in more info on Diamond Foods? Add it to your watchlist by clicking here.

The article Why Diamond Foods’ Shares Went Stale originally appeared on Fool.com.

Fool contributor Travis Hoium and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

5 Reasons Not to Worry This Week

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By Rick Munarriz, Munarriz, The Motley Fool

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It’s not a perfect world out there for investors, but things may be starting to get better.

Last week’s run to a new Dow Jones Industrial Average high and the encouraging drop of the unemployment rate to its lowest level in more than four years are welcome signs.

I recently went over some of the companies that are expected to post lower quarterly profits when they report this week. Thankfully, they’re the exceptions and not the rule.

Let’s go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.

Company

Latest Quarter EPS (Estimated)

Year-Ago Quarter EPS

Diamond Foods

$0.06

$0.01

Peregrine Pharmaceuticals

($0.07)

($0.13)

TICC Capital

$0.27

$0.26

Delcath Systems

($0.16)

($0.32)

Ebix

$0.45

$0.44

Source: Thomson Reuters.

Clearing the table
Let’s start at the top with Diamond Foods.

The snack giant is trying to get beyond an embarrassing couple of years. An accounting scandal and a botched attempt to acquire the Pringles line of potato chips smacked Diamond’s credibility, but the company that got its start 100 years ago when a collective of California walnut growers banded together is crawling its way back to credibility.

Diamond — whose brands include Emerald nuts, Pop Secret microwaveable popcorn, and Kettle potato chips — is still a work in progress. Analysts see revenue and earnings declining this fiscal year that ends in July. However, analysts still see bottom-line improvement this quarter, overcoming an expected 9% decline in revenue.

Peregrine is a fledgling and for now profitless biotech researching monoclonal antibodies for the treatment and diagnosis of cancer.

Investors aren’t buying into Peregrine for today’s financial results, and that’s a good thing. Peregrine is years away from profitability and meaningful revenue. The market will have to wait until its potentially promising treatments gain regulatory clearance to truly pay off. However, for now the important takeaway is that Peregrine’s deficits are getting narrower.

You have to start somewhere.

TICC Capital is one of the many high-yielding business development companies out there, investing in bank loans, debt, and equity tranches of small- and mid-sized companies. TICC then passes on the bulk of its proceeds to its investors in the form of dividends.

TICC Capital completed a secondary offering last month. Secondary offerings may be dilutive to investors, but TICC will put the new money to work earning more high yields off of cash flow positive companies.

Delcath Systems is trying to cash in on its drug/device combination product — the Delcath Hepatic Delivery System — for applications in oncology. Delcatch is initially focusing on treating primary and metastatic liver cancers.

Delcath is still early in its revenue-generating cycle. Analysts see it generating just $6.6 million in revenue this year, but that’s a major step up from 2012 where it likely raked in less than $0.5 million. We’ll know for sure on Wednesday when it reports. …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Diamond Foods Earnings: An Early Look

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By Dan Caplinger, The Motley Fool

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Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Diamond Foods is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

The controversy that ensnared Diamond Foods in late 2011 and early 2012 cost it what could have been a game-changing acquisition in the snack-foods space. Since then, the company has struggled to mount a comeback. Let’s take an early look at what’s been happening with Diamond Foods over the past quarter, and what we’re likely to see in its quarterly report on Monday.

Stats on Diamond Foods

 

  

Analyst EPS Estimate

$0.06

Year-Ago EPS

$0.01

Revenue Estimate

$239 million

Change From Year-Ago Revenue

(8.9%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Diamond Foods leave investors hungry this quarter?
Analysts haven’t been very optimistic about Diamond Foods‘ prospects over the past few months, as they’ve slashed their earnings estimates for the just-ended quarter in half, and lowered their calls for the full 2013 fiscal year by $0.04 per share. The stock, though, has bounced back substantially after apparently hitting bottom, up 16% since early December.

One big cause for analyst uncertainty has been the fact that Diamond had to restate all its earnings over the past two years in light of its ill-fated decision to use a controversial method of accounting for certain payments to farmers. In the aftermath of those restatements, Diamond hasn’t regained Wall Street‘s confidence, especially given the huge consequences of its failure, which resulted in Diamond having to cancel its agreement to purchase the Pringles snack line from Procter & Gamble .

But last month, investor interest in Diamond has heated up, with BlackRock having disclosed a nearly 8% stake in the snack-food maker. Blackrock’s move doesn’t appear to have activist intentions, and investors are taking the move as a sign of support for new CEO Brian Driscoll, who has experience handling snack foods from his time at Hostess Brands.

Still, the company is dealing with litigation from angry shareholders. Diamond got favorable news from a court in Delaware last week, when it dismissed a case brought by shareholders seeking damages for damage to the company’s reputation. But the decision cited the fact that the proper forum for the suit is in California, where another suit is ongoing.

In its quarterly report, watch for Diamond Foods to address ongoing concerns about its accounting practices, and its relationships with growers. If the company can truly fix the damage it caused, …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

This Is One Incredible CEO

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By Sean Williams, The Motley Fool

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The Motley Fool’s readers have spoken, and I have heeded your cries. After months of pointing out CEO gaffes and faux pas, I’ve decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first and are generally deserving of praise from investors. For reference, here is last week’s selection.

This week, we’ll turn our attention to the first female CEO to ever take the helm of food giant Campbell Soup , Denise Morrison.

Kudos to you, Ms. Morrison
It’s both an exciting and scary time to be a food producer. The exciting part stems from the sheer number of deals we’ve seen over the past year that are consolidating a generally slow-growth sector. Ketchup maker Heinz agreed to a $23.2 billion buyout last month led by Warren Buffett’s Berkshire Hathaway and Brazilian private equity firm 3G Capital. Considering the tight range Heinz had been trading in, and the slow but steady growth experienced by shareholders, the immediate 20% premium was gladly welcomed.

Another great example is Kellogg which picked up the Pringles brand from Procter & Gamble after its sale with Diamond Foods fell through. After lowering its outlook twice in 2012, Kellogg’s latest quarterly report demonstrated that Pringles sales kicked in 5% domestic growth and 1% overseas, helping to boost results past Wall Street‘s expectations.

On the other hand, inflation costs continue to rear their head in nearly every facet of food production. In fruits and vegetables, Dole Food disappointed investors in early January when it offered a full-year EPS forecast that was below the Street’s projections. Dole blamed the shortfall on ongoing contract negotiations as well as rising banana costs. Meat producers have shared similar woes, with Tyson Foods commenting at the Goldman Sachs annual agribusiness conference that its second quarter has been “challenging.” Margin compression from its pork and beef business caused by rising livestock feed prices, compounded with an expected USDA meat inspector furlough, which will slow production as a direct result of federal budget cuts, isn’t giving shareholders much to sink their teeth into.

Luckily for Campbell’s shareholders, Morrison’s company has walked this fine line with success — relying on its steady cash cow that is the soup business while also conservatively introducing new products to target younger age groups.

Campbell’s success lies in the fact that it controls approximately 60% of all soup market share. While a steady business, consumers also don’t tend to consume that much more soup each year, leaving cost-cutting, price increases, and overseas expansion as its primary growth driver in the soup arena. In its recently concluded second quarter, Campbell’s noted that it was able to grow its U.S. soup business despite lower ad spending thanks to its brand-building efforts over the years. Simply put, Morrison understands that with higher taxes come smaller discretionary budgets, which take big price increases off the table unless you want to completely scare away …read more
Source: FULL ARTICLE at DailyFinance