Diamond Foods, Inc. (DMND) has increased sales and earnings is a brutal market. The company acquired a major brand to increase its exposure as it continues to pressure the new 52-week high. Diamond is showing impressive growth rates while maintaining a 0.66 PEG ratio.

Company Description

Diamond Foods is a branded food company specializing in processing, marketing, and distributing culinary, snack, in-shell and ingredient nuts under the Diamond of California and Emerald of California brands. Diamond’s products include walnuts, pine nuts, pecans, peanuts, macadamia nuts, hazelnuts, cashews, Brazil nuts and almonds.

The company distributes is products to Asia, Europe, and the U.S. under the Diamond, Emerald, and Harmony brand names. Diamond is headquartered in Stockton, California, employs 750 people, and has a market cap of $421 million.

Another Earnings Surprise

On Sep 25 Diamond announced earnings per share of 16 cents, beating the consensus estimate of 13 cents. The 23% surprise was the fourth positive surprise in as many quarters. Full-year EPS increased 72% to 91 cents, up from 53 cents last year.

Snack sales were up 11% for the year, driven by strong North American Retail sales, which rose 24% for the fourth quarter.

Guidance and Growth

The company is projecting a 150 to 200 basis point increase in gross margin. Diamond will be focusing on areas with higher margins and cost saving strategies.

Analysts are estimating earnings for the currently year to be $1.25 per share, or a 37% increase over last year. The consensus estimate for next year is $1.68, which will be a 35% growth if estimates for both years are met.

Even with solid growth rates, the company remains attractively priced with a PEG ratio of 0.66.

Diamond Buys Pop Secret

Diamond announced the finalized acquisition of Pop Secret on Sep 15. The former General Mills brand was purchased for $190 million in cash. Pop Secret has 25% of the market share making it the second largest microwave popcorn.

The deal was initially announced on Aug 13 and the company expects annualized revenues of between $85 and $90 million.

The Chart

Shares of DNMD has been on a bullish run for most of the year and just set a new 52-week high. The stock is seeing some resistance near $27 and may need to consolidate just under that level to breakout.

Content Courtesy: Zacks Investment Research

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