The Middleby Corporation MIDD is poised to gain from its focus on launching new products and upgrading the existing ones per the industry trend. As for innovation, over the past year, the company introduced several products including MP Equipment, Blodgett ImVection, the Evo EVent Open Canopy Hood, PIZZABOT, TorQ, Discrete CFV, etc. Middleby is gaining market share in new and large product categories, including beverage and ice. It remains positioned to benefit from strong demand for ventless cooking products in the quarters ahead.
Over time, Middleby has expanded its market share, product offerings and customer base through acquisitions. Acquired assets boosted sales 0.3% year over year in the second quarter of 2024. In February 2024, the company acquired Germany-based GBT GmbH Bakery Technology. The buyout complemented Middleby’s existing bakery brands and strengthened its European presence in large-scale baking.
The company acquired Trade-Wind Manufacturing LLC in August 2023. The buyout complemented Middleby’s indoor and outdoor residential cooking brands, allowing it to offer its customers a broader portfolio of exciting designs and solutions. The acquisition of TERRY Water Treatment Solutions (July 2023) bolstered the company’s commercial food service operations. In June 2023, the company acquired Filtration Automation Inc., which boosted its food processing portfolio and expanded its frying system offerings.
Middleby’s acquisition of Flavor Burst (January 2023) complemented its existing product offerings in the beverage group. The acquisition of Marco Beverage Systems in December 2022 complemented the company's existing beverage portfolio and expanded its cold brew dispensers, coffee brewers and a variety of hot, cold and sparkling water dispenser offerings. The November 2022 acquisition of Escher Mixers helped it reduce product production costs and eliminate the usage of dough additives to produce premium quality bakery items with a longer shelf life by leveraging Escher’s automated dough mixing solutions and line capacity utilization.
At the end of the second quarter, the company’s cash and cash equivalents were $459.5 million, higher than the current portion of long-term debt of $44.3 million. This implies that it has sufficient cash to meet its current debt obligations. Further, the company’s times interest earned ratio is 5.5, higher than the preceding quarter’s ratio of 5.3. Also, it remains open to repurchasing common shares opportunistically. In 2023 and the first six months of 2024, it repurchased common shares worth $74.6 million and $18 million, respectively.
MIDD: Risks to Watch
Middleby has been witnessing weakness in the Residential Kitchen Equipment Group and Commercial Foodservice Equipment Group segments of late. Lower demand for residential kitchen products due to weakness in the housing market, amid lower existing and new home sales, is affecting the performance of the Residential Kitchen Equipment Group segment. Also, softness in the restaurant industry, due to declining traffic, high wages and food cost inflation, is affecting the demand for the company's products within the Commercial Foodservice Equipment Group segment.
International businesses expose Middleby to risks arising from geopolitical issues and unfavorable movement in foreign currencies. This is because a strengthening U.S. dollar may require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry . In the second quarter of 2024, forex woes negatively affected sales by 0.2%.
MIDD provides cooking, warming, food preparation and packaging equipment to commercial, industrial processing and residential markets. The company, which belongs to the Manufacturing - General Industrial industry, faces stiff competition from companies like Graham Corporation GHM, Crane Company CR and Parker-Hannifin Corporation PH.
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