It has been about a month since the last earnings report for Middleby (
MIDD Quick Quote MIDD - Free Report) . Shares have lost about 11% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Middleby due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Middleby Q4 Earnings & Revenues Beat, Increase Y/Y
The Middleby reported fourth-quarter 2022 adjusted earnings (excluding 12 cents from non-recurring items) of $2.57 per share, which beat the Zacks Consensus Estimate of $2.46. The bottom line increased 21.8% year over year on higher sales.
Net sales of $1,031.7 million surpassed the Zacks Consensus Estimate of $1,012 million. The top line jumped 19.1% year over year. Organic revenues in the reported quarter increased 14% year over year due to higher shipments, thanks to the benefits of investments to increase production throughput. Acquired assets boosted sales by 8.2%, while movements in foreign currencies had a negative impact of 3.1%. Segmental Results
Sales from the Commercial Foodservice Equipment Group (representing 61.4% of the net sales) were $633.27 million, up 19.2% year over year. Organic sales in the reported quarter increased 19.4%. Buyouts boosted sales by 2.2%, while movements in foreign currencies had a headwind of 2.4%.
Sales from the Residential Kitchen Equipment Group (representing 20.9% of the reported quarter’s net sales) totaled $216.07 million, up 3.1% year over year. Organic sales in the quarter under review decreased 8.7%. Buyouts had a positive impact of 16.4%, whereas movements in foreign currencies had a negative impact of 4.6%. Sales from the Food Processing Equipment Group (representing 17.7% of the reported net sales) summed $182.36 million, up 45.2% year over year. Organic sales in the quarter jumped 29.1%, while movements in foreign currencies had a negative impact of 3.5%. Acquisitions boosted sales by 19.7%. Margin Profile
In the fourth quarter, Middleby’s cost of sales increased 16.5% year over year to $641.64 million. Gross profit expanded 23.6% to $641.64 million. Gross margin increased to 37.8% from 36.4% in the year-ago quarter.
Selling, general and administrative expenses increased 16.6% year over year to $200.48 million. Operating income in the fourth quarter rose 35.7% year over year to $188.11 million. Operating margin increased to 18.2% from 16% in the year-ago period. Balance Sheet and Cash Flow
Exiting the fourth quarter, Middleby had cash and cash equivalents of $162 million compared with $180.36 million at the end of December 2021. Long-term debt was $2.68 billion at the end of the fourth quarter compared with $2.39 billion at the end of 2021.
In 2022, MIDD, carrying a Zacks Rank #2 (Buy), generated net cash of $332.55 million from operating activities compared with $423.40 million at the end of the year-ago period. Capital expenditure (net of sale proceeds) totaled $67.29 million compared with $40.26 million at the end of 2022. Free cash flow was $265.26 million in 2022, down 30.8% from the year-ago period. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -7.48% due to these changes.
Currently, Middleby has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
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 #2 (Buy). We expect an above average return from the stock in the next few months.