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June 6, 2014
10:21 EDTDMND, JBSSDiamond Foods shares crack after Q3 earnings miss
Shares of snack food and nuts company Diamond Foods (DMND) are falling after the company's third quarter earnings per share and revenue came in below analysts' consensus expectation. WHAT'S NEW: Diamond Foods reported its Q3 EPS was 11c, while analysts had a consensus forecast of 17c. The food company reported Q3 revenue of $190.9M which was slightly below analysts' forecast of $191.7M. Diamond Foods said that despite headwinds associated with tree nut commodity costs in FY14 that adversely impacted the nuts segment, the company expects to realize an increase in adjusted EBITDA year-over-year. WHAT'S NOTABLE: During the company's earnings conference call, Diamond Foods said that its nuts segment results were impacted by a $2.2M increase in walnut costs, which reduced this segment's gross margin. The company explained that $1.5M of this increase was for products sold in Q1 and Q2. As a result of the walnut commodity increase, Diamond Foods announced a price increase that will take effect on August 1. Overall, the company's nut segment net sales declined 5% for the quarter while gross margin declined 4.4%. This gross margin level reflected the effects of the walnut cost increase the company mentioned and Diamond Foods noted that Q3 is a seasonally low-volume quarter for the nut segment. Looking forward, the food company said its preliminary belief is that it will increase walnut pound receipts in FY15 versus this year. While this could change depending on the size and quality of the crop, Diamond Foods said it is encouraged by its progress to date. The company said that it still remains confident that a "strong foundation" for consistent growth in FY15 and beyond is being established this year. OTHERS TO WATCH: John B. Sanfilippo & Son (JBSS) is a rival to Diamond Foods in the U.S. nut industry. PRICE ACTION: During morning trading, shares of Diamond Foods fell $3.88 or 11.6%, to $29.44, while John B. Sanfilippo was down about 0.3% to $25.70.
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