On Sep 6, 2013, we reiterated our Neutral recommendation on
The Middleby Corporation
), based on solid second-quarter 2013 results.
Why the Retention?
Middleby reported strong results for the second quarter of
2013, with earnings per share of $2.00, increasing 19.8% from the
year-ago quarter. Earnings beat the Zacks Consensus Estimate of
$1.79 per share by 11.7%. Revenues increased 39.9% year over year
to $363.8 million and were above the Zacks Consensus Estimate of
$353.0 million. This was mainly a result of increased
contributions of $76.1 million or 29.3% of sales from various
Management expects the business to grow further in the coming
quarters on the back of acquisitions, accompanied by growth in
the international markets. Moreover, the company is confident of
the organic growth in the Commercial Foodservice Equipment Group
and the Food Processing Equipment Group, in the coming quarters,
based on better adaptability to new technologies.
Product launches by the company are also on a rise, with
roughly 19 launches expected in 2013; 10 in the Commercial
Foodservice segment and nine in the Food Processing segment.
The Zacks Consensus Estimate for 2013 has risen 4.2% in the
last 60 days to $7.87 per share, reflecting an estimated
year-over-year growth of 21.3%. For 2014, the Zacks Consensus
Estimate increased 4.2% in the past 60 days to $9.25 per share,
reflecting a year-over-year growth of 17.5%.
However, Middleby's acquired companies deal in low-margin
products. Increasing revenues from acquisitions lowers the
margins for the company. Middleby reported gross profit margin of
37.5% in the second quarter of 2013, declining 170 basis points
year over year. Excluding the acquisitions, gross margin for the
company in the reported quarter was 39.4%.
Additionally, Middleby is greatly affected by volatility in
the prices of raw materials. The company uses steel as the main
raw material, which accounts for roughly 15%-20% of the total
cost of sales. The fluctuation in steel prices impacts the
company's margins and profitability.
Other Stocks to Consider
Middleby currently carries a Zacks Rank #2 (Buy). Other stocks
worth a watch in the machinery sector are
). While Gorman-Rupp and Graham Corp. carry a Zacks Rank #1
(Strong Buy), Dover Corp. carries a Zacks Rank #2 (Buy).
DOVER CORP (DOV): Free Stock Analysis Report
GRAHAM CORP (GHM): Free Stock Analysis Report
GORMAN RUPP CO (GRC): Free Stock Analysis
MIDDLEBY CORP (MIDD): Free Stock Analysis
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