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Middleby's Crown Food Buyout to Boost Steam Cooking Business

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The Middleby Corporation (MIDD - Free Report) announced that it acquired Toronto, Canada-based Crown Food Service Equipment, Ltd. Financial terms of the transaction were not disclosed.

Crown Food, founded in 1981, is primarily engaged in manufacturing equipment related to steam cooking for use in the commercial foodservice industry. Crown Food generates approximately $20 million in revenues annually.

Details of Buyout

Per the deal, Middleby will integrate Crown Food with its Commercial Foodservice Equipment Group. This buyout will expand the company’s product offerings in the steam cooking end market. Moreover, Crown Food will help Middleby to expand its geographical reach, address customers’ needs for lower labor-related costs and support health awareness, among others.

It is worth mentioning here that Middleby’s Commercial Foodservice Equipment Group primarily engages in manufacturing cooking equipment — including proofing ovens, conveyor ovens, induction cooking and speed cooking ovens, and others — for institutional kitchens and restaurants. Leading equipment brands under this segment are CookTek, Lang, MPC, Combi, Southbend, Wells and PrefectFry. This segment accounted for roughly 66.1% of the company’s total revenues in third-quarter 2018.

Snapshot of Middleby’s Inorganic Initiatives

We believe that the above-mentioned transaction is consistent with Middleby’s policy of acquiring businesses to gain access to new customers, regions and product lines.

Prior to the Crown Food buyout, Middleby added a similar line of businesses to its portfolio by acquiring Market Forge Industries, Inc. and Firex S.r.l. Market Forge buyout was completed in January 2014 while Firex S.r.l. was acquired in April 2018. Since acquired, these steam cooking equipment manufacturers have been strengthening Middleby’s foothold in the commercial foodservice industry.

In addition to the above-mentioned buyouts, Middleby successfully completed $1-billion buyout of Taylor Company in June 2018. The acquisition will fortify Middleby’s position in the global commercial foodservice industry.

It’s worth mentioning here that Middleby used approximately $1,147.7 million for making acquisitions (net of cash acquired). Further, acquired assets added roughly $266.1 million to the company’s revenues.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $6.7 billion, Middleby currently carries a Zacks Rank #3 (Hold). Focus on the innovation of products, lower corporate taxes and synergistic gains from acquired assets will be advantageous for the company in the quarters ahead. However, the soft AGA Rangemaster business, high restructuring and interest expenses, and unfavorable movements in foreign currencies might continue to harm its performance.

In the past 60 days, Middleby’s earnings estimates have been decreased by five brokerage firms for 2018. Estimates for 2019 have been increased by three firms and lowered by two. Currently, the Zacks Consensus Estimate is pegged at $5.98 for 2018 and $6.93 for 2019, reflecting decline of 2.4% for 2018 and growth of 0.4% for 2019 from the respective tallies 60 days ago.

The Middleby Corporation Price and Consensus


The Middleby Corporation Price and Consensus | The Middleby Corporation Quote

In the past month, shares of Middleby yielded 6.1% return, outperforming 2.9% growth recorded by the industry.

Some better-ranked stocks in the industry are DXP Enterprises, Inc. (DXPE - Free Report) , EnPro Industries, Inc. (NPO - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all these three stocks improved for the current year. Further, positive earnings surprise for the last quarter was 17.95% for DXP Enterprises, 23.64% for EnPro Industries and 60.61% for Luxfer.

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