Why Diamond Foods Shares Jumped

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 Diamond Foods (NASDAQ: DMND  ) were sparkling today, gaining as much as 15% following an upgrade from BB&T Capital Markets.

So what: BB&T bumped its rating on the snack-food maker to buy from hold, lifting its price target to $28 as well.  The bank said it believed Diamond had moved past its previous litigation issues following the accounting scandal two years ago that forced the ouster of its CEO, an earnings restatement, and the collapse of its Pringles acquisition. BB&T also noted the food-maker overcoming other obstacles, saying, "Investors will be left with an attractive, instituted cost savings program, improving margins, and in our opinion, a potential takeout candidate."

Now what: With an attractive brand portfolio under its wings, including Kettle Brand chips, Pop Secret popcorn, and Emerald nuts, Diamond should eventually be able to make a return to full health (or get bought out), but that day still seems far away. The company has posted a net loss of about $50 million over the last four quarters, and I see little reason at this point for shares to appreciate without improvement in fundamentals. Diamond reports fourth-quarter earnings on Monday. Expectations are still low with the analyst consensus at a $0.03 per-share loss.  

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