No change in EPS
Diamond Foods (DMND) missed estimates by 12.5% for the first time in the last five quarters. It had surpassed estimates for EPS (earnings per share) in all the four quarters of fiscal 2015. The company reported earnings of $0.28 per share that were flat as compared to fiscal 1Q15. The earnings per share showed no year-over-year growth in this quarter. Also, the non-GAAP (generally accepted accounting principles) net earnings for the quarter equaled $8.8 million, and non-GAAP fully diluted EPS was $0.28, flat compared to $0.28 reported EPS even in the first quarter of fiscal 2015.
The analysts that follow this company are expecting it to grow earnings at an average annual rate of 15.5% over the next five years. Analysts are forecasting a 16.4% rise in earnings this year over last year. Also, analysts expect earnings growth next year of 15.9% over this year’s forecast earnings.
Outlook for fiscal 2016
Diamond Foods retains its previously mentioned guidance for 2016 in its press release of fiscal 1Q16 earnings. The company expects the proposed merger to close by the first quarter of calendar 2016. However, it believes that if it weren’t part of this merger, then it would still operate independently for the rest of fiscal 2016, and still continue with the previous guidance in the fiscal 4Q15 earnings release. It expects the annual adjusted EBITDA[1. Earnings before income, tax, depreciation, and amortization] to be in the range of $131–$136 million and non-GAAP diluted EPS to be in the range of $1.21–$1.32.
The company’s outlook excludes the expected merger and includes the following expectations:
- input cost inflation of 1%–2%
- productivity improvements of 2%–3%
- exchange rates of $1.55 per 1.00 euro and $0.75 per 1.00 Canadian dollar for fiscal 2016
- non-GAAP effective tax rate of around 30%–32%
- stock-based compensation of $10.5 million and 32 million fully-diluted shares outstanding at fiscal year end
- cash tax payments of ~$1 million, reflecting the current $348 million tax NOL (net operating loss) carry forward
The guidance for fiscal 2016 adjusted EBITDA excludes items such as interest expense, income taxes, stock-based compensation, as well as certain legal expenses and litigation settlements, depreciation, amortization, income associated with the equity investment, and acquisition-related costs. It also excluded the Fishers plant closure and related costs, certain expenses associated with the Emerald brand packaging transition, not to mention certain other actual and projected costs and asset impairments.
Diamond Foods’ main peers are Campbell Soup (CPB), General Mills (GIS), and Mondelez (MDLZ). They recorded EPS of $0.95, $0.79, and $0.42, respectively, for their last reported quarters. The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.6% in Campbell Soup, while the PowerShares S&P 500 Low Volatility (SPLV) invests 1.0% of its portfolio in the same company as of December 10, respectively.