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Middleby's Food Processing Unit to Gain From Scanico Buyout

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Machinery company The Middleby Corporation (MIDD - Free Report) recently announced the acquisition of Denmark-based Scanico A/S. Financial terms of the buyout have not been disclosed.

As revealed, Scanico A/S is a leading manufacturer of industrial equipment meant for freezing and cooling for the food processing industry. Its portfolio includes products like Ambient Spiral Cooler, Spiral Cooler, SingleStacking Freezer, Single Drum Freezer, Twin Drum Freezer, Impingement Freezer, TwinImp Crust Freezer, Belt Freezer, Spiral Proofer and Spiral Cooker. Founded in 2009, Scanico A/S currently has annual revenue generation capability of $30 million.

Scanico A/S will be integrated with Middleby’s Food Processing Equipment Group, strengthening the segment’s product portfolio and technologic expertise. This business segment of the company primarily manufactures equipment for the food processing industry, including products like batch ovens, processing ovens, defrosting and packaging equipment. Prime brands of this business are Auto-Bake, Alkar, Cozzini and RapidPak. In third-quarter 2017, the company derived nearly 14.7% of its revenues from this segment.

Acquiring meaningful businesses or disposing non-core assets have helped Middleby improve its business portfolio and work toward profitability enhancement. In this regard, the company’s buyouts of Sveba Dahlen Group (closed in June 2017), QualServ (completed in August 2017) and Globe Food Equipment acquisition (closed in October 2017) are worth mentioning. These acquired assets are expected to bolster revenues of the company’s Commercial Foodservice Equipment Group in the near term. Also, the Burford (May 2017) and CVP Systems (June 2017) buyouts are projected to improve near-term revenues of the company’s Food Processing Equipment segment. Notably, acquired assets added approximately $28.6 million or 5% to sales growth in the third quarter of 2017.
In a month, Middleby’s shares have yielded 15.2% return, outperforming 3.6% gain of the industry.

Zacks Rank & Stocks to Consider

Despite expansionary efforts, we believe that Middleby’s exposure to industry rivalry as well weak residential kitchen equipment business can jeopardize its prospects. The stock, with a market capitalization of nearly $7 billion, currently carries a Zacks Rank #3 (Hold).

The stock’s earnings estimates have been lowered for both 2017 and 2018 by four brokerage firms. Currently, the Zacks Consensus Estimate is pegged at $5.41 for 2017 and $6.08 for 2018, reflecting a decline of 2.3% for 2017 and 1% for 2018 from their respective tallies 60 days ago.

The Middleby Corporation Price and Consensus

The Middleby Corporation Price and Consensus | The Middleby Corporation Quote

Some better-ranked stocks in the industry are Kadant Inc. (KAI - Free Report) , Sun Hydraulics Corporation (SNHY - Free Report) and Altra Industrial Motion Corporation (AIMC - Free Report) . While Kadant and Sun Hydraulics sport a Zacks Rank #1 (Strong Buy), Altra Industrial Motion carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kadant pulled off an average positive earnings surprise of 20.32% in the last four quarters. Also, earnings estimates for 2017 and 2018 were revised upward in the last 60 days.

Sun Hydraulics delivered an average positive earnings surprise of 9.58% in the trailing four quarters. Also, bottom-line expectations for 2017 and 2018 improved over the past 60 days.

Altra Industrial Motion’s financial performance was impressive, with an average positive earnings surprise of 17.30% in the last four quarters. Also, earnings estimates for 2017 and 2018 were revised upward over the last 60 days.

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