Diamond Foods, Inc. DMND, a packaged food company, is slated to report third-quarter fiscal 2015 results on Jun 4. In the last quarter, the company had posted a positive earnings surprise of 52.2%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Though Diamond Foods is trying to reinstate itself on the growth trajectory, we cannot ignore the near-term headwinds. The company is still facing challenges in procuring walnut supplies and mending its ties with growers. These factors have been weighing on the company’s financial results and may also impact the quarter to be reported. In late 2011, the company was accused of making irregular payments to nut growers and reporting the same in other periods.
However, the company has been trying to augment its performance by improving price realization, lowering underperforming SKUs and reducing dependence on discounts.
Earnings Whispers
Our proven model does not conclusively show that Diamond Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Diamond Foods has an Earnings ESP of -6.25%. This is because the Most Accurate estimate stands at 15 cents, while the Zacks Consensus Estimate is pegged at 16 cents.
Zacks Rank: Diamond Foods’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements:
Casey's General Stores, Inc. CASY has an Earnings ESP of +14.29% and a Zacks Rank #2 (Buy).
G-III Apparel Group, Ltd. GIII has an Earnings ESP of +14.29% and a Zacks Rank #3.
Burlington Stores, Inc. BURL has an Earnings ESP of +5.00% and a Zacks Rank #3.
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