Diamond Foods shares slump on first-quarter outlook that falls below Wall Street estimates

Diamond Foods falls as 1Q outlook disappoints

NEW YORK — Shares of Diamond Foods Inc. tumbled more than 9 percent on Wednesday, after the snack food maker issued first-quarter guidance well below analyst estimates on a delayed nut harvest and higher advertising spending.

THE SPARK: The maker of Emerald snack nuts, Pop Secret popcorn and Diamond of California nuts said this year’s tree nut crop is going to be large, but harvested much later than normal. That will shift some of its sales from the first quarter into the second. It will also spend more on advertising, growing its spending to between $38 million and $43 million next year, up from $33 million this year.

Diamond Foods now expects to earn between 58 cents and 62 cents per share, well below the 92 cents per share that analysts are expecting, according to Thomson Reuters.

THE BIG PICTURE: The San Francisco-based company’s results for the fourth quarter, which it announced late Tuesday, rose from the prior year and beat estimates. The snack maker has been growing on acquisitions and becoming a larger player in the food marketplace, including having a presence in Super Bowl advertising.

THE ANALYSIS: BMO Capital Markets analyst Kenneth Zaslow said his expectations for the company remain unchanged, despite the shift in sales and lower first-quarter outlook. He said the company will still generate strong sales growth, even though it will be doing more promotions and cutting certain product lines. Zaslow said the company is gaining more distribution for top brands and it will expand its margins after the first quarter. He maintained his $50 price target and “Outperform” rating.

SHARE ACTION: Shares fell $4.04, or 9.5 percent, to $38.41 in morning trading Wednesday. Shares have traded in a range of $29.10 to $46.67 in the past 52 weeks.