Diamond Foods (NASDAQ:DMND) will release its quarterly report on Thursday, and investors are finally starting to show more confidence in the snack-food maker. After a plunge that cost the stock more than 80% of its value from late 2011 to the beginning of this year, Diamond Foods now looks better poised to claim its share of the lucrative snack space against PepsiCo (NYSE:PEP), Mondelez International (NASDAQ:MDLZ), and other bigger players in the industry.

Diamond Foods has been a huge force in the nut business, giving it a popular niche within the broader snack segment that's tailored to rising interest in healthier food offerings. Yet between having to restate earnings to accurately reflect payments to walnut growers and the loss of an opportunity to buy the Pringles brand, Diamond Foods has struggled to keep moving forward. Now that the stock has hit bottom and started to rise, can the company make a stronger challenge to PepsiCo and Mondelez and their command of the snack industry? Let's take an early look at what's been happening with Diamond Foods over the past quarter and what we're likely to see in its report.

Stats on Diamond Foods

Analyst EPS Estimate

$0.14

Change From Year-Ago EPS

(42%)

Revenue Estimate

$237.11 million

Change From Year-Ago Revenue

(8.3%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will Diamond Foods earnings turn higher this quarter?
In recent months, analysts have stayed pessimistic about Diamond Foods earnings, cutting their October-quarter estimates by more than half and reducing full-year fiscal 2014 projections by almost a third. The stock has climbed higher, though, rising 13% since late August.

One of the most important things Diamond Foods did during the quarter was to settle a lawsuit related to its accounting problems. The settlement cost the company $96 million, most of which it paid to the suing investors in the form of shares of stock valued at around $19 per share.

Yet from a fundamental standpoint, Diamond is still struggling. In its July quarter, Diamond Foods reported an 11% decline in revenue, and the settlement sent the company's net loss soaring. A writedown related to its Kettle Chips brand also worsened Diamond's losses. Moreover, although the company sees earnings improving next year, Diamond Foods still sees 2014 as part of a "multiyear turnaround strategy" that could take a while to play out fully. Diamond also gave poor guidance for the October quarter, with expectations for another substantial drop in revenue because of poor supplies of walnuts.

The key to Diamond Foods' opportunity over PepsiCo and Mondelez lies in its healthier focus. PepsiCo has suffered challenges to its beverage business due to concerns about sugary drinks and obesity, yet CEO Indra Nooyi has regularly emphasized the need to produce healthier products to cater to broader audiences. Mondelez feels the same pressure in its business, and with a head start Diamond Foods could eventually beat its two rivals to the punch at some point in the future.

In its earnings report, look to see if Diamond Foods can demonstrate that its financial results are in the process of bottoming out and heading back upward. Only once it does so will Diamond pose any real threat to PepsiCo, Mondelez, and their peers.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends PepsiCo. The Motley Fool owns shares of PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.