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Middleby (MIDD) Gains From Business Strength, Risks Persist
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The Middleby Corporation (MIDD - Free Report) is poised to benefit from a solid backlog level and strong order growth across its segments. The company has been witnessing strength across its end markets and solid consumer demand in the Commercial Foodservice and Food Processing segments. Shifting mix toward higher technology solutions, along with effective pricing actions and disciplined cost control policies, are aiding the Commercial Foodservice Equipment Group. Higher demand, driven by automated solutions for protein and bakery products, has been driving the growth of the Food Processing Equipment Group.
The company remains focused on acquiring businesses to gain new customers and access new regions and product lines. Middleby’s acquisition of Trade-Wind Manufacturing (in August 2023) strengthened its portfolio of indoor and outdoor residential cooking products.
The buyout of TERRY Water Treatment Solutions in July 2023 bolstered the company’s commercial foodservice operations. In June 2023, MIDD acquired Filtration Automation, which boosted its food processing portfolio and expanded its frying system offerings. In the third quarter of 2023, acquisitions had a positive impact of 1.8% on its sales growth.
Middleby’s sound liquidity position adds to its strength. It exited the third quarter with cash and cash equivalents of $167.2 million, higher than the current maturities of long-term debt of $44.3 million. This implies that MIDD has sufficient cash to meet its current debt obligations. Also, it remains open to repurchasing shares opportunistically. For instance, in the first nine months of 2023, it repurchased common shares worth $74.5 million.
Image Source: Zacks Investment Research
In the past three months, the Zacks Rank #3 (Hold) company has gained 19% compared with the industry’s 16.6% growth.
Despite the positives, weakness in its Residential Kitchen Equipment Group segment due to a decline in domestic and international sales remains a concern for MIDD. In the first nine months of 2023, the segment’s revenues declined 27.2% year over year.
Escalating cost of goods sold has also been a major concern for the company. In the first nine months of 2023, its selling, general and administrative expenses increased 3.1%, year over year, due to rising compensation and marketing expenses. Supply-chain challenges and inflationary costs have been affecting its performance.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has remained stable. The stock has rallied 37.2% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has increased 1% in the past 60 days. Shares of the company have increased 7.9% in the past three months.
Kadant delivered a trailing four-quarter average earnings surprise of 17.3%. In the past 60 days, the consensus estimate for KAI’s 2023 earnings has improved by 5.2%. The stock has risen 24.8% in the past three months.
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Middleby (MIDD) Gains From Business Strength, Risks Persist
The Middleby Corporation (MIDD - Free Report) is poised to benefit from a solid backlog level and strong order growth across its segments. The company has been witnessing strength across its end markets and solid consumer demand in the Commercial Foodservice and Food Processing segments. Shifting mix toward higher technology solutions, along with effective pricing actions and disciplined cost control policies, are aiding the Commercial Foodservice Equipment Group. Higher demand, driven by automated solutions for protein and bakery products, has been driving the growth of the Food Processing Equipment Group.
The company remains focused on acquiring businesses to gain new customers and access new regions and product lines. Middleby’s acquisition of Trade-Wind Manufacturing (in August 2023) strengthened its portfolio of indoor and outdoor residential cooking products.
The buyout of TERRY Water Treatment Solutions in July 2023 bolstered the company’s commercial foodservice operations. In June 2023, MIDD acquired Filtration Automation, which boosted its food processing portfolio and expanded its frying system offerings. In the third quarter of 2023, acquisitions had a positive impact of 1.8% on its sales growth.
Middleby’s sound liquidity position adds to its strength. It exited the third quarter with cash and cash equivalents of $167.2 million, higher than the current maturities of long-term debt of $44.3 million. This implies that MIDD has sufficient cash to meet its current debt obligations. Also, it remains open to repurchasing shares opportunistically. For instance, in the first nine months of 2023, it repurchased common shares worth $74.5 million.
Image Source: Zacks Investment Research
In the past three months, the Zacks Rank #3 (Hold) company has gained 19% compared with the industry’s 16.6% growth.
Despite the positives, weakness in its Residential Kitchen Equipment Group segment due to a decline in domestic and international sales remains a concern for MIDD. In the first nine months of 2023, the segment’s revenues declined 27.2% year over year.
Escalating cost of goods sold has also been a major concern for the company. In the first nine months of 2023, its selling, general and administrative expenses increased 3.1%, year over year, due to rising compensation and marketing expenses. Supply-chain challenges and inflationary costs have been affecting its performance.
3 Promising Stocks
We have highlighted three better-ranked stocks from the same space, namely Crane Company (CR - Free Report) , Flowserve Corporation (FLS - Free Report) and Kadant Inc. (KAI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has remained stable. The stock has rallied 37.2% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has increased 1% in the past 60 days. Shares of the company have increased 7.9% in the past three months.
Kadant delivered a trailing four-quarter average earnings surprise of 17.3%. In the past 60 days, the consensus estimate for KAI’s 2023 earnings has improved by 5.2%. The stock has risen 24.8% in the past three months.