On Oct 12, 2016, Zacks Investment Research downgraded Middleby Corp. (MIDD - Analyst Report) to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy). Going by the Zacks model, companies with a Zacks Rank #3 are likely to perform in line with the broader market over the next few quarters.
Why on Hold?
Middleby has been boosting its sales and profitability on the back of product portfolio solidification and greater business diversification. Also, the company has been steadily widening its margins, benefiting from greater operational efficacy. Moreover, Middleby intends to finance several of its capital deployment programs with free cash generated from operating activities. Notably, the company’s latest acquisitions are also estimated to boost its revenue and earnings growth trajectory in the near term.
Over the last 60 days, though the Zacks Consensus Estimate for the stock remained unchanged for 2016, it has moved down for 2017. This reflects analysts’ cautious view on the stock.
Middleby’s top and bottom lines are being hurt by some major headwinds.
In second-quarter 2016, the company’s net sales declined by roughly $4.9 million due to U.S. dollar appreciation. A stronger U.S. dollar would continue to weigh over the company’s aggregate revenues in the upcoming quarters.
We also believe that weak energy resource prices are currently affecting the revenues generated by manufacturing and industrial companies like Middleby. Moreover, volatile input prices and stiff industry rivalry are two other issues encountered by the company.
Stocks to Consider
Some better-ranked stocks within the industry are listed below:
Nordson Corporation (NDSN - Snapshot Report) currently sports a Zacks Rank #1 (Strong Buy). The company's average positive earnings surprise is 9.13% for the last four trailing quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chart Industries Inc. (GTLS - Snapshot Report) and Altra Industrial Motion Corp. (AIMC - Analyst Report) hold a Zacks Rank #2. While the average positive earnings surprise of Chart Industries is 428.37% for the last four trailing quarters, Altra Industrial Motion’s average positive earnings surprise is 9.20% over the same time frame.
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