Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Middleby Stock Sank 49% in March

By Lee Samaha – Apr 2, 2020 at 6:39PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The food-equipment company is feeling the brunt of the impact from the COVID-19 pandemic.

What happened

Shares of food-equipment company Middleby (MIDD 0.01%) fell 49.1% in March, according to data provided by S&P Global Market Intelligence. The fall marks a miserable month for food-equipment companies, as well as other businesses with exposure to the foodservice industry.

The chart below shows the decline in Middleby's stock in 2020 alongside two of its food-equipment technology peers, Welbilt and John Bean Technologies. It's been a brutal decline in 2020, and investors don't have to look far to see the reason why.

MIDD Chart

MIDD data by YCharts.

The big move down happened when it became clear that the COVID-19 outbreak was going international from its birthplace in China to create a pandemic around the globe. As such, the social isolation measures necessary to contain the virus are hitting the restaurant and foodservice industry very hard. And if Middleby's customers -- which include the likes of Papa John's, McDonalds, and Burger King, to name a few -- are suffering, Middleby is, as well.

So what

The disappointment in 2020 follows after a difficult year in 2019, and there are many questions around the medium-term outlook for the company. For example, while the impact of the coronavirus is likely to be heavy in the near term, it's far from clear that customers will be interested to return to foodservice outlets for an extended period of time, even after the COVID-19 pandemic is contained.

Silver and red kitchen equipment labeled MagiKitch'n.

Image source: Middleby.

Moreover, the longer that consumers are eating at home, the more likely it is that there might be some sort of structural shift for a preference toward eating at home rather than dining out -- the last thing Middleby wants to happen.

These questions are particularly significant for Middleby because it's a company that's been been built on a string of acquisitions. It's a great strategy when its end markets are in growth mode but problematic if they start to decline. Indeed, even though Middelby's reported sales increased 8.7% in 2019, they only increased 0.1% after adjusting for acquisitions, foreign exchange, and business closures. Clearly, Middleby didn't enter 2020 with any great sales momentum, anyway.

Now what

As with much of the market, Middleby investors will have to wait and see how long the containment measures will be in place, and then hope that its end markets normalize, with some improvement in its organic growth. Patience is required. 

Selim Bassoul, former CEO, chairman, and president of Middleby, serves as Chief Innovator at The Motley Fool. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Middleby. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Middleby Stock Quote
Middleby
MIDD
$137.93 (0.01%) $0.02
McDonald's Stock Quote
McDonald's
MCD
$239.09 (0.25%) $0.59
Papa Johns International Stock Quote
Papa Johns International
PZZA
$74.43 (-1.50%) $-1.13
John Bean Technologies Stock Quote
John Bean Technologies
JBT
$94.06 (0.30%) $0.28
Welbilt, Inc. Stock Quote
Welbilt, Inc.
WBT

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.