Shares of Diamond Foods Inc. (DMND) gained nearly 6.5% during yesterday’s after-hours trading session after the company posted strong financial results for the fourth quarter and fiscal 2014.
The company’s adjusted earnings for the fourth-quarter jumped almost twofold to 19 cents per share from 10 cents posted in the prior-year quarter, mainly benefitting from strong sales performance. Moreover, adjusted earnings surpassed the Zacks Consensus Estimate of 13 cents per share.
Including one-time items, the company reported loss per share of 6 cents during the quarter against a loss of $6.56 in fourth-quarter fiscal 2013.
Quarter in Detail
Total sales for the reported quarter were $219.1 million, up 9.6% from $199.8 million recorded in the year-ago comparable quarter. The top line also surpassed the Zacks Consensus Estimate of $205 million. Robust performance at the company’s Snacks and Nuts divisions mainly led to the top-line growth.
Net sales at the company’s Snacks segment increased 11.1% to $130.1 million, while at the Nuts segment net sales improved 7.5% year over year to $88.9 million. Diamond Foods witnessed improved distribution and market share gains at both the segments.
Gross profit for the quarter decreased 7.2% year over year to $49.3 million from $53.1 million in the year-ago quarter. Gross margin contracted 410 basis points (bps) to 22.5% from 26.6% in the year-earlier quarter, mainly due to higher tree nut commodity costs and increased logistic expense.
Gross profit at Diamond Foods’ Snacks segment increased 6.1% year over year to $44.9 million. However, as a percentage of sales, it contracted 160 bps to 34.5%, mainly due to higher logistic expenses.
At the Nuts segment, gross profit declined 58.9% to $4.4 million primarily due to higher logistic expenses and increased tree nut commodity costs. Therefore, gross margin contracted 810 bps to 4.9%.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter came in at $23.9 million versus $24.6 million in the year-ago comparable quarter. Adjusted EBITDA margin contracted 140 bps to 10.9%.
Fiscal 2014: A Synopsis
Diamond Foods’ net sales of $865.2 million for fiscal 2014 came ahead of the Zacks Consensus Estimate of $852 million, improving marginally from the fiscal 2013 net sales of $864 million. The company’s adjusted earnings for the fiscal surged 18.5% year over year to 64 cents per share and surpassed the Zacks Consensus Estimate of 49 cents. However, on a reported basis, Diamond Foods posted a loss of $6.33 per share compared with $7.33 posted in fiscal 2013.
Financial Update
Diamond Foods ended fiscal 2014 with total current assets of $243.9 million compared with $231.1 million available at the end of fiscal 2013. As of Jul 31, 2014, long-term debt obligation was $637.3 million while shareholders’ equity was $283.8 million.
Initiated Fiscal 2015 Guidance
After concluding fiscal 2014 on a strong note, Diamond Foods provided its fiscal 2015 guidance, wherein it expects adjusted earnings to come in the range of 90 cents to $1.10 per share. The adjusted earnings guidance range is based on diluted share outstanding of 31.9 million, stock based compensation of $9.7 million and an effective tax rate of about 24%. Furthermore, the company projects adjusted EBITDA to come in between $115 million and $123 million.
Other Stocks to Consider
Currently, Diamond Foods has a Zacks Rank #3 (Hold). Some better-ranked stocks in the food industry include Boulder Brands Inc. (BDBD), The Hain Celestial Group Inc. (HAIN) and J&J Snack Foods Corp. (JJSF). All of these stocks carry a Zacks Rank #2 (Buy).
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