Will Diamond Foods (DMND) Beat Earnings Estimates in Q1? - Analyst Blog

Diamond Foods Inc. (DMND), a specialty food company, focused on processing, marketing and distribution of snack products as well as culinary ingredient and in-shell nuts, is slated to report its first-quarter fiscal 2015 results on Dec 8, 2014. In the last quarter, it posted a positive earnings surprise of 46.2%. Let's see how things are shaping up for this announcement.

Factors Influencing the Quarter

We believe Diamond Foods is progressing well with its planned cost containment endeavors and operational initiatives, which has helped it to post improved top and bottom line results. Moreover, we expect the company's future results to exhibit more sustained growth of its brands due to product innovation and differentiation as well as an improved cost structure.

Although the company provided a favorable guidance for fiscal 2015, we remain slightly cautious about the upcoming quarter's results due to the near-term headwinds, such as challenges related to walnut supplies and mending ties with growers. Furthermore, its highly leveraged balance sheet keeps us skeptical about the company's performance.

Earnings Whispers?

Our proven model does not conclusively show that Diamond Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, this is not the case here, as you will see below:

Zacks ESP: ESP for Diamond Foods is 0.00%. This is because the Most Accurate estimate stands at 24 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #3 (Hold): Diamond Foods' Zacks Rank #3 when combined with a zero ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:

Nike Inc. (NKE) has an Earnings ESP of +1.45% and a Zacks Rank #2 (Buy).

Casey's General Stores Inc.'s (CASY) Earnings ESP stands at +6.25% and it carries a Zacks Rank #3.

Costco Wholesale Corporation (COST) with an Earnings ESP of +0.93% holds a Zacks Rank #3.