Diamond Foods shares plunge following restatement
Diamond Foods Inc.'s shares plummeted to six-year low Thursday after the snack food company restated its financial results for two years and provided an update on the current year's performance.
Investors appeared uncertain of the company's future growth prospects as costs rise and walnut deliveries drop.
THE SPARK: Diamond, late Wednesday, effectively wiped away $56.5 million in profit from its books after it restated its results from 2010 and 2011. The company also posted a net loss of $53.4 million for the first three quarters of 2012 due to a weaker walnut business and costs tied to a recent investigation, its financial restatements and a terminated deal to buy Pringles.
THE BIG PICTURE: The San-Francisco based company is restating its results after an internal investigation last year found that it improperly accounted for payments to walnut growers, which skewed its financial results.
Diamond suffered mightily from the fallout. Its stock price sank on concerns about the payments, it lost its bid to buy the Pringles brand from Procter & Gamble Co. and it eventually replaced its CEO and chief financial officer over the issue.
CEO Brian Driscoll, who joined the company in May, says the company has a new direction as it invests in its brands, cuts costs and rebuilds its walnut supply.
THE ANALYSIS: KeyBanc Capital Markets analyst Akshay Jagdale said that restatements were generally in line with expectations, wrapping up a major issue for the company. But the results for the first three quarters show it still has issues to overcome.
The company's first three quarters were hampered by costs in its walnut business and lower deliveries. Additionally, he said the new strategy for the snack business, which focuses on its Emerald nuts and Kettle chips brands, brings a new set of risks — he said there was "little visibility" into the company's vision.
"Overall, the strategic focus has shifted from growth to cost cutting (and) margin enhancement," Jagdale said. Margins measure how much revenue a company keeps as profit after costs.
An ongoing investigation by the Securities and Exchange Commission may also weigh on shares, he said, and kept a "Hold" rating.
SHARE ACTION: Diamond Foods stock was one of the biggest decliners on the markets Thursday.
Its stock price plunged $4.22, or 22 percent, to $15.28 in afternoon trading, earlier dropping as low as $14.50. That's the stock's lowest point since 2006. Diamonds shares have lost the bulk of their value since concerns about the payments became known.
