Driven by net price realization policies and effective cost management, Diamond Foods Inc.’s (DMND) adjusted earnings for the fourth quarter of fiscal 2013 rose 9 times compared with the Zacks Consensus Estimate of break-even figures. Moreover, quarterly earnings of 9 cents per share also rose substantially from 2 cents, including stock-based compensation, earned in the year-ago quarter.
Including one-time items, the company reported a loss of $6.71 per share during the quarter against a loss of $1.52 in the fourth quarter of fiscal 2012.
Quarter in Detail
Total sales for the reported quarter were $199.8 million, down 10.8% from $224.0 million recorded in the year-ago comparable quarter. However, the top line surpassed the Zacks Consensus Estimate of $192.0 million. The year-over-year decline in total sales was mainly due to weak performances at the company’s Nuts segment, partially offset by improved sales at the Snacks segment.
Net sales at the company’s Snacks segment grew 3.3% to $117.1 million in the quarter. However, net sales at the Nuts segment fell 25.2% to $82.7 million due to a fall of 34% in volume, offset by improved price realization.
Gross profit for the quarter surged 25.5% year over year to $53.1 million compared with $42.3 million in the year-ago quarter. Gross margin expanded 770 basis points (bps) to 26.6% compared with the year-ago quarter’s gross margin of 18.9%. The expansion in gross margin resulted from better price realization and effective cost management at the company’s operating segments.
Gross profit at Diamond Foods’ Snacks segment increased 15.7% year over year to $42.3 million, while as a percentage of sales it improved 380 bps to 36.1%. Gross profit at Diamond Foods’ Nuts segment increased 88.5% to $10.7 million, whereas gross margin expanded 790 bps to 13.0%.
Selling, general and administrative (SG&A) expenses escalated 284.6% year over year to $129.2 million, including $96.1 million primarily related to the cost of settling the securities class action litigation as announced on Aug 21. Advertising expenses in the quarter nearly doubled to $12.2 million from $6.4 million in the year-ago quarter.
Adjusted EBITDA in the quarter came in at $24.6 million compared with $21.8 million in the year-ago comparable quarter.
Fiscal-year 2013 Synopsis
For the full year, Diamond Foods reported adjusted earnings per share of 40 cents, beating the Zacks Consensus Estimate of 33 cents. However, it declined 27.3% from 55 cents, including stock-based compensation, earned in the year-ago fiscal. Including one-time items, the company reported net loss of $7.48 per share compared with a loss of $3.98 per share reported in fiscal 2012.
Net sales for the year declined 12% to $864.0 million, while it surpassed the Zacks Consensus Estimate of $856 million.
Diamond Foods ended fiscal 2013 with cash & availability of $74.5 million under its total revolving credit capacity of $230 million. As of Jul 31, 2013, net debt was $585.1 million, including the Oaktree notes. Capital expenditures for the year totaled $9.6 million.
Fiscal 2014 Outlook
Diamond Foods expects sales and earnings in the first quarter of fiscal 2014 to be lower compared to the year-ago quarter due to the costs related to Emerald SKU rationalization and lower walnut supply. However, the company expects to post year-over-year earnings gains for fiscal 2014 as the benefits of its multi-year turnaround strategies are realized.
Other Stocks to Consider
Currently, Diamond Foods has a Zacks Rank #3 (Hold). Other stocks in the specialty food industry that are performing better include Green Mountain Coffee Roasters Inc. (GMCR), Pinnacle Foods Inc. (PF) and Boulder Brands Inc. (BDBD). Of these, Green Mountain Coffee and Pinnacle Foods carry a Zacks Rank #1 (Strong Buy), while Boulder Brands holds a Zacks Rank #2 (Buy).
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