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Why Is Middleby (MIDD) Up 47.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Middleby (MIDD - Free Report) . Shares have added about 47.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Middleby due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Middleby Q1 Earnings Surpass Estimates, Sales Miss
The Middleby Corporation reported mixed results for first-quarter 2020, with earnings surpassing estimates by 12.3% and revenues missing the same by 1.4%.
The company’s adjusted earnings in the reported quarter were $1.46 per share, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose 5.8% from the year-ago quarter figure of $1.38 on benefits from acquired assets and improved operating income.
Revenue Picture
In the quarter under review, Middleby’s sales were $677.5 million, reflecting a year-over-year decline of 1.4%. Organic revenues in the quarter declined 5.9% year over year. Acquired assets aided sales by 5.2%, while unfavorable movements in foreign currencies had a negative impact of 0.6%.
Notably, its net sales missed the Zacks Consensus Estimate of $687 million.
The company reports net sales under three segments. A brief discussion of the segments is provided below:
Sales from the Commercial Foodservice Equipment Group (representing 65.4% of the reported quarter’s net sales) were $443.1 million, decreasing 3.1% year over year. Sales, excluding the impact of forex woes and buyouts, declined 8.7% in the quarter.
Sales from the Residential Kitchen Equipment Group (representing 19.2% of the reported quarter’s net sales) totaled $130.1 million, down 4.9% year over year. Sales (excluding the impact of forex woes and buyouts) in the quarter declined 5%.
Sales from the Food Processing Equipment Group (representing 15.4% of the reported quarter’s net sales) were $104.3 million, increasing 12.8% year over year. Excluding the impact of forex woes and buyouts, sales increased 6.1% year over year.
Margin Profile
In the quarter under review, Middleby’s cost of sales fell 0.5% year over year to $427.3 million. It represented 63.1% of sales compared with 62.5% in the year-ago quarter. Gross profit declined 2.8% year over year to $250.2 million. Gross margin decreased 60 basis points (bps) to 36.9%.
Selling, general and administrative expenses decreased 1.3% year over year to $143.9 million. It represented 21.2% of sales in the reported quarter. Operating income in the quarter under review improved 4.3% year over year to $105.4 million. Operating margin rose 90 bps year over year to 15.6%. Net interest expenses and deferred financing amortization totaled $15.7 million, down from $20.5 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Middleby had cash and cash equivalents of $381 million, up from $94.5 million at the end of the last reported quarter. Long-term debt grew 16.4% sequentially to $2,177.2 million.
In the quarter, the company generated net cash of $87.1 million from operating activities, reflecting growth of 156.9% from the year-ago quarter. Capital expenditure totaled $9.2 million versus $8.1 million in first-quarter 2019. Free cash flow increased 202.2% year over year to almost $78 million.
Outlook
In the quarters ahead, Middleby anticipates gaining from the focus on product innovation, improving selling techniques and solid offerings to customers. Also, in response to the coronavirus crisis, it has been executing cost-control measures to maintain a healthy capital structure. Some of the actions being taken by the company include the reduction of discretionary expenses and adjustment of global office and production workforces.
For the Commercial Foodservice Equipment Group, the company expects to benefit from innovative products and investments it made for enhancing technology capabilities. Although it witnessed sales improvements from the restaurant industry during April compared to the previous month, it expects sales performance to remain under pressure on account of the coronavirus outbreak in the near term.
For the Residential Kitchen Equipment Group, the company is witnessing lower sales in both the U.S. and UK markets on account of the coronavirus outbreak. Middleby anticipates experiencing continued low demand environment across its businesses in the quarters ahead.
For the Food Processing Equipment Group, stable backlog will likely aid its performance in the quarters ahead. Although of late the overall demand form the industry continues to be relatively stable, the company believes that the pandemic might affect its business performance in the near term.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months. The consensus estimate has shifted -62.57% due to these changes.
VGM Scores
Currently, Middleby has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Middleby has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Middleby (MIDD) Up 47.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Middleby (MIDD - Free Report) . Shares have added about 47.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Middleby due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Middleby Q1 Earnings Surpass Estimates, Sales Miss
The Middleby Corporation reported mixed results for first-quarter 2020, with earnings surpassing estimates by 12.3% and revenues missing the same by 1.4%.
The company’s adjusted earnings in the reported quarter were $1.46 per share, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose 5.8% from the year-ago quarter figure of $1.38 on benefits from acquired assets and improved operating income.
Revenue Picture
In the quarter under review, Middleby’s sales were $677.5 million, reflecting a year-over-year decline of 1.4%. Organic revenues in the quarter declined 5.9% year over year. Acquired assets aided sales by 5.2%, while unfavorable movements in foreign currencies had a negative impact of 0.6%.
Notably, its net sales missed the Zacks Consensus Estimate of $687 million.
The company reports net sales under three segments. A brief discussion of the segments is provided below:
Sales from the Commercial Foodservice Equipment Group (representing 65.4% of the reported quarter’s net sales) were $443.1 million, decreasing 3.1% year over year. Sales, excluding the impact of forex woes and buyouts, declined 8.7% in the quarter.
Sales from the Residential Kitchen Equipment Group (representing 19.2% of the reported quarter’s net sales) totaled $130.1 million, down 4.9% year over year. Sales (excluding the impact of forex woes and buyouts) in the quarter declined 5%.
Sales from the Food Processing Equipment Group (representing 15.4% of the reported quarter’s net sales) were $104.3 million, increasing 12.8% year over year. Excluding the impact of forex woes and buyouts, sales increased 6.1% year over year.
Margin Profile
In the quarter under review, Middleby’s cost of sales fell 0.5% year over year to $427.3 million. It represented 63.1% of sales compared with 62.5% in the year-ago quarter. Gross profit declined 2.8% year over year to $250.2 million. Gross margin decreased 60 basis points (bps) to 36.9%.
Selling, general and administrative expenses decreased 1.3% year over year to $143.9 million. It represented 21.2% of sales in the reported quarter. Operating income in the quarter under review improved 4.3% year over year to $105.4 million. Operating margin rose 90 bps year over year to 15.6%. Net interest expenses and deferred financing amortization totaled $15.7 million, down from $20.5 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Middleby had cash and cash equivalents of $381 million, up from $94.5 million at the end of the last reported quarter. Long-term debt grew 16.4% sequentially to $2,177.2 million.
In the quarter, the company generated net cash of $87.1 million from operating activities, reflecting growth of 156.9% from the year-ago quarter. Capital expenditure totaled $9.2 million versus $8.1 million in first-quarter 2019. Free cash flow increased 202.2% year over year to almost $78 million.
Outlook
In the quarters ahead, Middleby anticipates gaining from the focus on product innovation, improving selling techniques and solid offerings to customers. Also, in response to the coronavirus crisis, it has been executing cost-control measures to maintain a healthy capital structure. Some of the actions being taken by the company include the reduction of discretionary expenses and adjustment of global office and production workforces.
For the Commercial Foodservice Equipment Group, the company expects to benefit from innovative products and investments it made for enhancing technology capabilities. Although it witnessed sales improvements from the restaurant industry during April compared to the previous month, it expects sales performance to remain under pressure on account of the coronavirus outbreak in the near term.
For the Residential Kitchen Equipment Group, the company is witnessing lower sales in both the U.S. and UK markets on account of the coronavirus outbreak. Middleby anticipates experiencing continued low demand environment across its businesses in the quarters ahead.
For the Food Processing Equipment Group, stable backlog will likely aid its performance in the quarters ahead. Although of late the overall demand form the industry continues to be relatively stable, the company believes that the pandemic might affect its business performance in the near term.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months. The consensus estimate has shifted -62.57% due to these changes.
VGM Scores
Currently, Middleby has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Middleby has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.