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Inside Diamond Foods' Shame: Key Takeaways from the Recent Earnings Miss

Tamara Walsh
December 9, 2013

Diamond Foods (NASDAQ: DMND) has endured a lot over the past two years. Of course, the same can be said for the snack-food maker's shareholders. The stock hit a low of $12.85  last November, following an accounting scandal involving improper payments to walnut growers. Diamond Foods' CEO and CFO were both ousted as a result, though the damage didn't end there . Between late 2011 and the start of this year the stock lost more than 80% of its value -- devastating Diamond Foods shareholders in its wake.

Now the company is promising a brighter future. But, can investors really trust Diamond Foods again after the mess it's made? Let's dig a little deeper and see what the company's first-quarter earnings tell us about the health of the business .

A rough start to fiscal 2014
Diamond reported quarterly earnings for its first quarter of fiscal 2014 last week. Unfortunately, the results highlighted some serious underlying problems for the snacks giant. Diamond reported a larger-than-expected loss of $42.2 million for the quarter , or $1.92 a share. That's more than three times last year's loss of $10.7 million, or $0.49 a share .

Charges related to a lawsuit stemming from the accounting scandal in early 2012 were part of the problem. In fact, in August Diamond Foods agreed to pay $96 million to the SEC to settle the suit . However, aside from these costs, the quarterly results also reflect a troubling sales trend in its nuts business. For the period ended Oct. 31, Diamond suffered a 17.1% decline in nut sales, while ov