Why Diamond Foods' Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Emerald Nuts maker Diamond Foods (NASDAQ: DMND  ) jumped 20% today after the company settled a lawsuit

So what: Diamond announced a proposed $96 million settlement relating to accounting troubles. The settlement would be paid with $11 million in cash and 4.45 million shares of stock.  

Potentially better news was that the company said it sees fiscal fourth-quarter revenues being between $196 million and $201 million, well above the $187 million analysts expected.

Now what: Long-term, the improved financial results will mean the most because they could help the company reduce leverage. But the proposed settlement was also about 25% to 40% of what plaintiffs thought was possible, so if it holds up, the settlement may be a good deal. I think the company's improved financial outlook will help, but I'd like to see much lower leverage before buying in.

Interested in more info on Diamond Foods? Add it to your watchlist by clicking here.


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