The Middleby Corporation MIDD reported better-than-expected fourth-quarter 2020 results, with earnings surpassing estimates by 14.1%. This is the company’s sixth consecutive quarter of impressive results. Also, sales in the fourth quarter outpaced estimates by 4.8%. The company’s adjusted earnings came in at $1.62 per share, beating the Zacks Consensus Estimate of $1.42. However, the bottom line decreased 19% from the year-ago quarter figure of $2.00 on weak sales generation. Revenue Picture
In the fourth quarter, Middleby’s sales were $729.3 million, reflecting a year-over-year decline of 7.4%. Organic revenues in the quarter slid 9.3% mainly on the coronavirus mayhem. Acquired assets boosted sales by 1.3% and movements in foreign currencies had a positive impact of 0.6%.
However, net sales exceeded the Zacks Consensus Estimate of $696 million. The company reports net sales under three segments. A brief discussion of those segments is provided below: Sales from the Commercial Foodservice Equipment Group (representing 58.7% of the reported quarter’s net sales) were $428.4 million, down 16.4% year over year. Organic sales in the quarter decreased 18.7% on market-related challenges and the pandemic’s impact. Buyouts and movements in foreign currencies had a positive impact of 1.7% and 0.5%, respectively. Sales from the Residential Kitchen Equipment Group (representing 24.7% of the reported quarter’s net sales) totaled $180.1 million, up 17.3% year over year. Organic sales in the quarter increased 14.8%, while buyouts and movements in foreign currencies positively impacted results by 1% and 1.4%, respectively. Strong demand in end markets proved to be beneficial in the quarter. Sales from the Food Processing Equipment Group (representing 16.6% of the reported quarter’s net sales) summed $120.8 million, decreasing 0.6% year over year. Organic sales in the quarter declined 0.4% while movements in foreign currencies had a negative impact of 0.2%. Margin Profile
In the quarter, Middleby’s cost of sales fell 4.9% year over year to $473.3 million. It represented 64.9% of sales compared with the year-ago quarter’s 63.2%. Gross profit fell 11.7% to $256 million. Gross margin shrunk 170 basis points to 35.1%.
Selling, general and administrative expenses fell 1% year over year to $147.3 million. It represented 20.2% of sales in the reported quarter. Operating income in the quarter decreased 38.7% to $93.3 million. Operating margin fell 650 percentage points year over year to 12.8%. Net interest expenses and deferred financing amortization totaled $22.7 million, up from the year-ago quarter’s $19.3 million. Balance Sheet and Cash Flow
As of Jan 2, 2021, Middleby had cash and cash equivalents of $268.1 million, up 21.7% from the $220.3 million witnessed at the end of the last reported quarter. Long-term debt decreased 5.7% sequentially to $1,706 million.
In the reported quarter, the company generated net cash of $208.6 million from operating activities, reflecting growth of 41.2% from the year-ago quarter. Capital expenditure totaled $0.3 million compared with $12.8 million recorded in fourth-quarter 2019. Free cash flow increased 54.4% to $208.3 million. Outlook
In the quarters ahead, Middleby anticipates benefiting from its investments in sales and technological-enhancement initiatives. Also, the company remains hopeful to gain from the recovery in end markets in 2021.
Zacks Rank & Other Stocks to Consider
The company currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks are iRobot Corporation ( IRBT Quick Quote IRBT - Free Report) , Franklin Electric Co., Inc. ( FELE Quick Quote FELE - Free Report) and Emerson Electric Co. EMR. While iRobot sports a Zacks Rank #1 (Strong Buy), Franklin Electric and Emerson carry a Zacks Rank #2. You can see . the complete list of today’s Zacks #1 Rank stocks here iRobot has a trailing four-quarter earnings surprise of 228.19%, on average. Franklin Electric has a trailing four-quarter earnings surprise of 19.15%, on average. Emerson has a trailing four-quarter earnings surprise of 21.53%, on average. Zacks Top 10 Stocks for 2021
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