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Here's Why You Should Steer Clear of Middleby (MIDD) Now

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The Middleby Corporation (MIDD - Free Report) is grappling with persistent supply-chain issues, rising costs and expenses, high debt levels and foreign-currency headwinds.

The current Zacks Rank #4 (Sell) player has a market capitalization of $7 billion.

Let’s discuss the factors that might continue to take a toll on the firm.

Steep Costs and Expenses: Middleby has been witnessing inflationary increases in costs and expenses over time. In the first nine months of 2022, the cost of goods sold increased 2.7% due to supply-chain constraints, high raw material costs and COVID-related issues in China. The ongoing supply-chain restrictions (especially component parts), labor issues and cost inflation are expected to persist in the quarters ahead, affecting MIDD’s margins and profitability.

High Debt Level: In the last five years (2017-2021), the company’s long-term debt witnessed an 18.5% CAGR. MIDD’s long-term debt remained high at $2,693.3 million at the end of third-quarter 2022, despite effort to lower debts. Also, Middleby’s long-term debt/capital ratio is currently 0.52, higher than 0.38 of the industry. Such high debt levels raise concerns for the company.

Forex Woes: Given its widespread presence in the international markets, Middleby is exposed to unfavorable foreign currency movement. For instance, in second-quarter and in third-quarter 2022, foreign exchange headwinds had an adverse impact of 2.5% and 3.6%, respectively, on its revenues, year over year. A stronger U.S. dollar might depress MIDD's overseas business results in the quarters ahead.

 

Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 5.1% downward.

Stocks to Consider

Some better-ranked companies from the Industrial Products sector are discussed below:

Applied Industrial Technologies, Inc. (AIT - Free Report) presently has a Zacks Rank #1 (Strong Buy) and a trailing four-quarter earnings surprise of 24.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

AIT’s earnings estimates have increased 4.6% for fiscal 2023 in the past 60 days. Shares of Applied Industrial have risen 34.8% in the past six months.

IDEX Corporation (IEX - Free Report) presently has a Zacks Rank #2 (Buy). IEX’s earnings surprise in the last four quarters was 5.7%, on average.

In the past 60 days, IDEX’s earnings estimates have increased 1.8% for 2022. The stock has rallied 28.4% in the past six months.

EnerSys (ENS - Free Report) delivered an average four-quarter earnings surprise of 2.1%. ENS presently carries a Zacks Rank #2.

ENS’ earnings estimates have increased 0.6% for fiscal 2023 in the past 60 days. The stock has gained 22.1% in the past six months.

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