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Will Diamond Foods Continue Its Growth in Earnings?

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Earnings ahead of estimates

Diamond Foods (DMND) has surpassed estimates for EPS (earnings per share) in all the four quarters of fiscal 2015. In its last reported fiscal 4Q15, the company showed earnings of $0.23 per share, beating estimates by 10%. The non-GAAP (generally accepted accounting principles) net earnings for the quarter equaled $7.2 million, and non-GAAP diluted EPS was $0.23, compared to $0.19 in the fourth quarter of fiscal 2014. The earnings per share also showed a year-over-year growth of 21%. The EPS consensus estimate for the fiscal 1Q16 is $0.32. In our post-earnings series on Diamond Foods, we’ll see if the company managed to beat the estimates.

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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.

Expectations for fiscal 2016

The company provided an outlook for fiscal 2016 in its fiscal 4Q15 earnings press release. The guidance anticipates non-GAAP EPS to be in the range of $1.21–$1.32 per share and adjusted EBITDA[1. Earnings before income, tax, depreciation, and amortization] to be in the range of $131–$136 million. The guidance includes the following expectations:

  • input cost inflation of 1%–2%
  • productivity improvements of 2%–3%
  • exchange rates of $1.55 per 1.00 euro, as well as $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)

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, acquisition-related costs, not to mention certain other actual and projected costs and asset impairments.

Competitors

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 Cambell Soup, while the PowerShares S&P 500 Low Volatility (SPLV) invests 1.0% of its portfolio in the same company as of December 3, respectively.

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