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Analyst Blog

We issued an updated research report on The Middleby Corporation on Jun 6, 2014. Over the past few quarters, the company experienced strong quarterly results with acquisitions playing a major tailwind. For instance, acquired assets like Market Forge Industries, Automatic Bar Controls and Celfrost contributed significantly to the company's top-line growth in the first quarter of 2014. Additionally, Middleby took over Processing Equipment Solutions in April this year. These acquisitions are expected to further benefit results in the coming quarters.

Middleby also anticipates rise in revenues due to the ongoing equipment upgrade from various restaurant owners. Further, the company is launching over 50 products in the second half of 2014, including ranges, ovens, refrigeration, cooktops and ventilation products, which will boost the company’s market share. 

Recently, Middleby announced a three-for-one stock split, which will be carried out by distributing two additional shares for each share held by shareholders of record as of Jun 16, 2014. This will be treated as a stock dividend payment which will increase the company’s shares outstanding from 19 million to roughly 57 million.

However, due to the various acquisitions, the company is experiencing increased selling and distribution as well as general and administrative expenses. This is negatively impacting the margins. Moreover, Middleby is exposed to risks like volatility in raw materials. The company uses steel as the main raw material, which accounts for roughly 15–20% of the total cost of sales. Fluctuating steel prices impacts the company’s margins and profitability.

With a market capitalization of $4.8 billion, Middleby holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Gorman-Rupp Co. , Illinois Tool Works Inc. and Dover Corporation . While Gorman-Rupp sports a Zacks Rank #1 (Strong Buy), Illinois Tool Works and Dover Corporation hold a Zacks Rank #2 (Buy).

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