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Middleby Aims to Keep Moving Forward

By Dan Caplinger - May 7, 2016 at 1:28PM

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The kitchen-equipment specialist is looking for ways to keep growing.


Image: Middleby.

Millions of people across the globe have gotten increasingly interested in getting the most out of the food they eat, and Middleby (MIDD 1.04%) has cashed in on that trend with its commercial and household kitchen equipment. Even though some investors have been concerned about the sustainability of the company's growth, Middleby has been able to keep making progress, and coming into its first-quarter financial report, Middleby investors hope that the company will stay on track to take advantage of the opportunities it has. Let's take an early look at how Middleby has fared and whether it can keep up positive momentum in its earnings report.

Stats on Middleby

Expected EPS Growth

5%

Expected Revenue Growth

27%

Forward Earnings Multiple

20.5

Expected 5-Year Annualized Growth Rate

22%

Source: Yahoo! Finance.

Will Middleby earnings stay on the rise?
In recent months, investors have grown less confident about Middleby earnings, reducing their first-quarter views by more than a nickel per share and making cuts of between 2% and 7% to their full-year 2016 and 2017 projections. The stock has bounced back from its recent lows, however, climbing 24% since early February.

Middleby's fourth-quarter results got the kitchen-equipment maker moving back in the right direction. Sales climbed 23%, and although GAAP earnings fell from year-ago levels, the company's adjusted earnings topped the consensus forecast by 15%. Much of the pick-up in sales came from the strong growth of the company's Residential Kitchen Equipment group, and that was led by acquisition-related gains without which Middleby's residential divisions would have lost ground on the top line. By adding brands like AGA Rangemaster and Viking into the mix, Middleby was able to put into place some positive moves that will cut costs and enhance profitability in the long run.

For a while during the first quarter, it appeared as though Middleby would be involved in yet another substantial acquisition. Investment company KKR had announced in March that it planned to arrange for the sale of coffee-machine maker WMF in a deal with an estimated value of about $1.7 billion. Several manufacturers of household appliances and private equity investors had expressed interest in WMF, and Middleby was named as one of the companies that were expected to bid. Speculation included the potential for multiple bidders to join up and basically split up the parts of WMF. As of late April, however, Middleby was not on a list of remaining participants in making takeover bids, including companies from China and Europe that included Swedish company Electrolux. No final deal has been announced, but it appears that Middleby might end up on the outside looking in at WMF. That isn't necessarily a bad thing, given the difficulties that some makers of coffee machines have had recently in navigating the U.S. market.

Still, Middleby has work to do on the businesses it already has under its corporate umbrella. In its conference call after last quarter's earnings, CEO Selim Bassoul noted that the company was "still reeling from the impact of the [Viking] product recall on a product that we did not inherit." Even though that happened a year ago, Middleby has struggled to get dealers comfortable with the Viking name again. That has been a challenge, but it is also a big opportunity if Middleby is successful in building up confidence from the dealers in its distribution channels once more.

In the Middleby report, watch closely to see what Bassoul and his team say about Viking and other major initiatives that are going on. Favorable trends are still present throughout the industry, so it will be important for Middleby to prove that it still has its finger on the pulse of the sector and can take full advantage of opportunities for growth.

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The Middleby Corporation Stock Quote
The Middleby Corporation
MIDD
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