The Middleby Corporation ( MIDD Quick Quote MIDD - Free Report) delivered impressive results for first-quarter 2021. Its earnings surpassed estimates by 9.82% and sales exceeded the same by 4.12%. The company’s adjusted earnings in the reported quarter were $1.79 per share, beating the Zacks Consensus Estimate of $1.63. Also, the bottom line increased 22.6% from the year-ago quarter figure of $1.46 on the back of sales and operating margin improvement. Revenue Picture
In the first quarter, Middleby’s sales were $785.1 million, reflecting year-over-year growth of 11.9%. Organic revenues in the reported quarter increased 8.4% year over year on the back of a recovery in market conditions and strengthening demand from consumers. Acquired assets boosted sales by 1.8% and movements in foreign currencies had a positive impact of 1.6%.
Also, net sales beat the Zacks Consensus Estimate of $728 million. Backlog was at $724.5 million at the end of the first quarter of 2021, up from $522.7 million at the end of 2020. 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 63.5% of the reported quarter’s net sales) were $481.2 million, up 8.6% year over year. Organic sales in the reported quarter increased 3.2%. Buyouts and movements in foreign currencies had positive impacts of 4.2% and 1.2%, respectively. Sales from the Residential Kitchen Equipment Group (representing 21.7% of the reported quarter’s net sales) totaled $164.4 million, up 26.4% year over year. Organic sales in the quarter under review increased 28.7%, while movements in foreign currencies positively impacted results by 3.5%. Divestitures had a negative impact of 5.8%. Sales from the Food Processing Equipment Group (representing 14.8% of the reported quarter’s net sales) summed $112.5 million, increasing 7.9% year over year. Organic sales in the first quarter grew 6.5%, whereas movements in foreign currencies had a positive impact of 1.3%. Margin Profile
In the quarter under review, Middleby’s cost of sales increased 12.9% year over year to $482.2 million. It represented 63.6% of sales compared with the year-ago quarter’s 63.1%. Gross profit expanded 10.3% year over year to $275.9 million. Gross margin shrunk 50 basis points (bps) to 36.4%.
Selling, general and administrative expenses increased 7.7% year over year to $155 million. It represented 20.4% of sales in the reported quarter. Operating income in the first quarter increased 14.9% year over year to $121.2 million. Operating margin expanded 40 bps year over year to 16%. Net interest expenses and deferred financing amortization totaled $16.1 million, up from the year-ago quarter’s $15.7 million. Balance Sheet and Cash Flow
Exiting the first quarter, Middleby had cash and cash equivalents of $309.3 million, up 15.4% from the $268.1 million witnessed at the end of the last reported quarter. Long-term debt increased 5.5% sequentially to $1,801 million.
In the reported quarter, the company generated net cash of $59.7 million from operating activities, reflecting a decline of 31.5% from the year-ago quarter. Capital expenditure totaled $5.4 million versus the $9.2 million recorded in first-quarter 2020. Free cash flow decreased 30.3% year over year to $54.3 million. Outlook
In the quarters ahead, Middleby anticipates benefitting from demand improvements and technological enhancement initiatives. Dealing with high costs and challenges in the supply chain remains priorities.
For the Commercial Foodservice Equipment Group, the company expects to benefit from the revival in restaurant, and travel and leisure industries. Challenges related to the pandemic remain issues for markets like Latin America and India. For the Residential Kitchen Equipment Group, healthy orders, driven by the revival in construction, healthy home sales trends and product innovations, have been proving beneficial. Also, digital marketing actions, sales initiatives and focus on showroom sales will likely open up opportunities. For the Food Processing Equipment Group, solid product offerings and a focus on innovation will likely aid performance.