Diamond Foods (DMND) On Traders Radar Ahead of Restatement Deadline

Shares of embattled snack food maker Diamond Foods, Inc. (Nasdaq: DMND) are in focus today as the date to file its restated earnings and 10-Qs for FY12-to-date approaches (06/11/12).

Analyst at Jefferies commented on the situation and said they expect the stock to perform well if the company files on time. That said, if the company needs another extension they expect pressure on the stock.

Given that the firm has no clarity if the company will meet the deadlines, they said they would prefer to stay on the sidelines until they have more clarity regarding the company's growth and margin picture.

Commenting specifically on what future margin structure could look like the firm said: "We assume that DMND’s FY11 gross margin will be 410bps lower in restated earnings than previously announced, dropping to 21.8%, and the adj. EBIT margin would decline to 7.9%. As a result, adj. EBIT would be lowered 34% to $77 million and adj. EPS would drop to $1.26. Based on lower margins and a less optimistic outlook for the nut business (due to higher costs) we would expect DMND’s FY12 adj. EPS to be below $0.20. Depending on meeting exchange trigger goals that were set in the Oaktree financing agreement (see below) adj. diluted EPS for FY14 could
be between $1.96 and $2.28, in our view, with an adj. EBIT margin of between 13% and 14%." This comes with the caveat that even historic numbers for DMND are currently based on speculation so they prefer not to rely on these forecasts for their valuation but instead want to wait for the restatement in order to update their model and price target.

Jefferies maintained a Hold rating and $27 price target.

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