KeyBanc Says Diamond Foods (DMDN) Break-Up Value is $44/Sh, But Will Trade Well Below

KeyBanc's commented on Diamond Foods (NASDAQ: DMND) following the restatement due to improper payments to walnut growers and the CEO/CFO replacement news.

"Our view on the outcome of the investigation, which was based on indepth and thorough research, proved to be incorrect," Analyst Akshay Jagdale commented. "In terms of Pringles, we now expect P & G to walk away from the deal. We estimate DMND's underlying earnings power in FY11 in the worst case scenario to be $1.80 and believe fair value for the stock in a break-up scenario is $44/share ($33 excluding DMND's nut business)"

The restatements will most likely lead to DMND tripping its debt covenant, the firm noted. This would force the Company to renegotiate at most likely a higher interest rate.

"We believe the stock will trade well below what we consider is fair value until the financial statements are restated, the Company finds a permanent replacement for the interim CEO and CFO positions, and the debt covenants are renegotiated."

The firm is maintaining its Hold rating.

For an analyst ratings summary and ratings history on Diamond Foods click here. For more ratings news on Diamond Foods click here.

Shares of Diamond Foods closed at $36.66 yesterday.

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