A month has gone by since the last earnings report for Middleby (MIDD - Free Report) . Shares have added about 7.2% 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. <p style="text-align: justify;"><strong><u>Second-Quarter 2018 Results</u></strong><br /><br />Middleby reported better-than-expected results for second-quarter 2018.<br /><br /><strong><u>Earnings/Revenues</u></strong><br /><br />Quarterly adjusted earnings came in at $1.63 per share, beating the Zacks Consensus Estimate of $1.60. However, the bottom line came in higher than the year-ago tally of $1.39 per share.</p><p style="text-align: justify;">Net sales in the reported quarter came in at $668.1 million, up 15.3% year over year. The top line also outpaced the Zacks Consensus Estimate of $651 million. The upswing was driven by acquisition benefits, Accounting Standards Codification 606 adoption, and favorable foreign currency-translation impact.</p><p style="text-align: justify;"><em>Segmental Break-Up</em><br /><br />Net sales of the Commercial Foodservice Equipment Group were up 24.1% year over year to $414.1 million.<br /><br />Residential Kitchen Equipment Group’s revenues increased 4.7% year over year to $160.4 million.<br /><br />Food Processing Equipment Group’s revenues inched up 1.3% year over year to $93.6 million.<br /><br /><strong><u>Costs/Margins</u></strong><br /><br />Cost of sales in the second quarter was $417.4 million compared to $344.7 million recorded in the year-ago quarter. Gross profit margin in the quarter came in at 37.5%, shrinking 300 basis points (bps) year over year. Gross margin shrunk due to reduced margins resulting from acquired businesses, unfavorable mix of the Food Processing Equipment segment and lesser volumes.<br /><br />Selling, general and administrative expenses totaled $135 million, as against $121.6 million incurred in the year-ago period. Operating margin came in at 16.7%, contracting 300 bps, year over year.</p><p style="text-align: justify;"><strong><u>Balance Sheet/Cash Flow</u></strong><br /><br />Middleby exited the second quarter with cash and cash equivalents of $92.3 million, as against $89.7 million recorded at the end of 2017. Long-term debt was $2,060.3 million compared with $1,023.7 million recorded as of Dec 31, 2017.<br /><br />During the June-end quarter, operating cash flow increased to $146.6 million, from $86 million recorded in the year-ago quarter.<br /><br /><strong><u>Outlook</u></strong><br /><br />Middleby expects that the recently-made acquisitions will continue to bolster its revenues and profitability in the upcoming quarters. The company believes the ongoing restructuring moves and product launches will also help strengthen its competency. </p>
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Middleby has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 C. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.