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Stockton-based nut giant thrives despite recession

Not much is going well in the region's economy, but Stockton-based nut giant Diamond Foods Inc., has been making nearly all the right moves.

When the farm price of walnuts rose, Diamond simply raised the cost of its packaged nuts. Shoppers kept buying.

After sales of the firm's Emerald snack line slowed, Diamond decided to grow by acquisition, buying Pop Secret. Analysts cheered.

Now, the strengthening dollar and the global economic slowdown are hammering bulk nut prices. And Diamond is looking at bigger profits.

The result: While the Nasdaq is down 41 percent for the year as of Monday's close, Diamond is up 21 percent. Diamond's stock had been substantially higher before a big drop last Thursday – and that bad day brought CNBC's Jim Cramer racing to defend the company's fundamentals on national television.

"What Diamond is doing right is growing its earnings – and that's pretty much all it takes in this environment" to please investors, said Mark Argento, a senior analyst at Craig-Hallum Capital Group LLC in Minneapolis.

Still, as Thursday's drop showed, the party may not last.

Diamond is having a tough time getting its snack nuts onto store shelves in many grocery chains. And competition in the nut business is getting tougher: Retailers are expanding their lines of lower-priced store-brand nuts, and food giants like Frito-Lay are jumping into the mix.

What's more, Diamond is being sued by some of the 1,600 farmers – including many in the Sacramento Valley – who supply its walnuts and claim they've been underpaid. If the suit recovers even a fraction of the more than $50 million the plaintiffs claim growers are owed, Diamond's profit growth could be wiped out.

Read the complete story at sacbee.com

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