It has been about a month since the last earnings report for Middleby (MIDD Quick QuoteMIDD - Free Report) . Shares have added about 12.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Middleby Q1 Earnings & Revenues Surpass Estimates

Middleby reported better-than-expected first-quarter 2022 results. Its earnings and sales beat estimates by 0.5% and 6.8%, respectively.

MIDD’s adjusted earnings in the reported quarter were $2.13 per share, surpassing the Zacks Consensus Estimate of $2.12. The bottom line increased from the year-ago figure of $1.79 on the back of sales.

Revenue Picture

In the first quarter, Middleby’s sales were $994.7 million, reflecting year-over-year growth of 31.2%. MIDD’s top line beat the Zacks Consensus Estimate of $932 million.

Organic revenues in the reported quarter increased 11.7% year over year on the back of improving market conditions. Acquired assets boosted sales 20.7%, while movements in foreign currencies had a negative impact of 1.2%.

Middleby reports net sales under three segments. A brief discussion on the same is provided below:

Sales from the Commercial Foodservice Equipment Group (representing 54.7% of the net sales) were $543.6 million, up 13.0% year over year. Organic sales in the reported quarter increased 10.9%. Buyouts boosted sales by 3%, while movements in foreign currencies had a headwind of 1%.

Sales from the Residential Kitchen Equipment Group (representing 33.3% of the reported quarter’s net sales) totaled $331.1 million, up 101.4% year over year. Organic sales in the quarter under review increased 16.1%. Buyouts had a positive impact of 86.6%, whereas movements in foreign currencies had a negative impact of 1.3%.

Sales from the Food Processing Equipment Group (representing 12% of the reported net sales) summed $119.9 million, increasing 6.6% year over year. Organic sales in the quarter grew 8.4%, whereas movements in foreign currencies had a negative impact of 1.8%.

Margin Profile

In the first quarter, Middleby’s cost of sales increased 37.7% year over year to $664.2 million, reflecting 66.8% of sales compared with the year-ago quarter’s 63.6%. Gross profit expanded 19.8% to $330.5 million. Gross margin decreased 320 basis points (bps) to 33.2%.

Selling, general and administrative expenses increased 33% year over year to $206.1 million, accounting for 20.7% of sales in the reported quarter. Operating income in the first quarter increased to $122.6 million from $121.2 million. Operating margin decreased 370 bps to 12.3%.

Net interest expenses and deferred financing amortization totaled $17.7 million, up 9.9% from the year-ago quarter’s $16.1 million.

Balance Sheet and Cash Flow

Exiting the first quarter, Middleby had cash and cash equivalents of $146.6 million, down 18.7% from $180.4 million witnessed at the end of the last reported quarter. Long-term debt increased 7.7% sequentially to $2,570.1 million.

In the first three months of 2022, MIDD used net cash of $15.3 million from operating activities compared with $59.7 million generated in the year-ago quarter. Capital expenditure totaled $14.5 million compared with $5.4 million recorded in the year-ago quarter. Free cash outflow was $29.8 million in the reported quarter.

Outlook

In the quarters ahead, Middleby anticipates benefiting from strengthening end markets and a strong backlog level. However, challenges in the supply chain, cost inflation and labor issues are likely to be spoilsports.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -12.4% due to these changes.

VGM Scores

Currently, Middleby has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Middleby has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Middleby is part of the Zacks Manufacturing - General Industrial industry. Over the past month, Applied Industrial Technologies (AIT Quick QuoteAIT - Free Report) , a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended March 2022 more than a month ago.

Applied Industrial Technologies reported revenues of $980.66 million in the last reported quarter, representing a year-over-year change of +16.6%. EPS of $1.75 for the same period compares with $1.37 a year ago.

For the current quarter, Applied Industrial Technologies is expected to post earnings of $1.68 per share, indicating a change of +11.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Applied Industrial Technologies has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.