Diamond Foods Faces Delisting After Another Earnings Flub

Monday's news highlights reason for investors to be weary of Diamond Foods even as shares in the fast growing company remain near one-year lows. Ahead of Diamond Foods Monday statement that it wouldn't file earnings, Thilo Wrede an analyst at Jefferies cautioned investors about the restatement.

"As we currently have no certainty that the company will actually meet the deadline we prefer to stay on the sidelines until we have more clarity regarding DMND's growth and margin picture," wrote Wrede in a June 7 note to clients. While Wrede calculates that Diamond Foods restatement will likely cut at profit margins and lower its 2012 fiscal year earnings per share to 20 cents, he concedes those estimates are based on speculation without actual earnings statements. "We strongly believe that DMND will have to work hard to regain investor trust and additional disclosures would be a major part of this endeavor."

Recently, Diamond Foods has been through a string of negotiations to weather its accounting woes, which killed an acquisition of potato chip maker Pringles and made creditor forbearance agreements crucial. Most of Diamond Foods bank debt was originally taken out to acquire Pringles from Procter & Gamble (PG) for $2.35 billion.

Procter & Gamble pulled its sale of the unit when Diamond Foods disclosed that an internal investigation of its accounting cast the company's earnings in doubt. Pringles was subsequently sold to Kellogg(K) in February.

With the prospect of restating higher walnut supply costs -- a key for its Emerald Nuts unit -- and weaker than previously reported earnings, Diamond Foods was likely to violate leverage covenants on those loans, precipating a string of lender forbearance agreements and a search for new capital.