The Middleby Corporation’s (MIDD - Free Report) price performance has been impressive in the past three months, which is evident from a 26.4% increase in share price in the said period. Strong product offerings, improving order trends, solid backlog and healthy liquidity position supported positive market sentiments for the company.
The Elgin, IL-based company, with $5.8 billion of market capitalization, belongs to the Zacks Manufacturing - General Industrial industry. The company currently carries a Zacks Rank #3 (Hold).
In the past three months, Middleby has outperformed the 11.4% and 9.2% growth of the industry and S&P 500, respectively.
Factors Favoring the Stock
Middleby is experiencing improving orders across residential businesses in both the U.S. and U.K. markets. Also, strong backlog level (about $138 million at the end of July 2020) and increasing demand from food processing customers will likely continue supporting the company’s top-line performance in the quarters ahead. In addition, the roll out of COVID-19-related products for restaurants and retail locations has been helping it in boosting the top line.
Also, the company’s robust liquidity position is adding to its strength. In second-quarter 2020, its cash flow from operations recorded an increase of 14.8% on a year-over-year basis to $77.6 million. Also, in the quarter, the company’s free cash flow grew 35.8% on a year-over-year basis to $73.5 million. Its healthy liquidity position will likely continue to help it tide over the difficult operating conditions caused by the coronavirus pandemic.
Moreover, the company has been benefiting from several acquisitions that it has made over the last few quarters. Its buyout of RAM Fry Dispensers (January 2020) has been strengthening product offerings in the restaurant automation platform. Also, the company’s Deutsche Beverage buyout (March 2020) is helping it enhance product offerings in the beverage platform. Notably, the acquired assets boosted its sales by 5.2% and 2.3% in the first and second quarters of 2020, respectively.
In addition, analysts have become increasingly bullish on the company over the past couple of months. Its earnings estimates for 2020 and 2021 have been raised 2.1% and 2.5%, respectively, over this time frame.
However, the company’s high debt profile poses a concern. Notably, its long-term debt was $2,373 million at the end of second-quarter 2020, reflecting a 9% increase sequentially. Also, Middleby’s ability to repay financial obligations weakened in the quarter, with times interest earned declining from 7 in first-quarter 2020 to 5.8 in the second quarter. Further, increase in debt levels can raise the company’s financial obligations.
Some better-ranked companies from the same space include EnPro Industries, Inc. (NPO - Free Report) , Flowserve Corporation (FLS - Free Report) and Roper Technologies, Inc. (ROP - Free Report) . While EnPro currently sports a Zacks Rank #1 (Strong Buy), Flowserve and Roper carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnPro delivered an earnings surprise of 248.3%, on average, in the trailing four quarters.
Flowserve delivered an earnings surprise of 10.2%, on average, in the trailing four quarters.
Roper delivered an earnings surprise of 5.4%, on average, in the trailing four quarters.
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