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Middleby (MIDD) Down 5.9% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Middleby (MIDD - Free Report) . Shares have lost about 5.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Middleby due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Middleby Q3 Earnings Surpass Estimates, Sales Lag
Middleby reported better-than-expected results for the third quarter of 2019, with earnings surpassing estimates by 5.52%. However, sales in the third quarter lagged estimates by 5.02%.
The company’s adjusted earnings in the reported quarter were $1.72 per share, surpassing the Zacks Consensus Estimate of $1.63. Also, the bottom line rose 4.2% from the year-ago quarter figure of $1.65 on benefits from acquired assets and growth in margins.
Revenue Picture
In the quarter under review, Middleby’s sales were $724 million, reflecting year-over-year growth of 1.5%. Organic revenues in the quarter declined 2.9% year over year. Acquired assets grew sales by 5.8% while unfavorable movements in foreign currencies had a negative impact of 1.1%. Closure of non-core business had a negative 0.3% impact.
However, its net sales lagged the Zacks Consensus Estimate of $762 million.
The company reports net sales under three segments. A brief discussion of those segments is provided below:
Sales from Commercial Foodservice Equipment Group (representing 69.2% of the reported quarter’s net sales) were $501 million, increasing 6.2% year over year. Sales, excluding the impact of forex woes and buyouts, grew 0.5% in the quarter.
Sales from Residential Kitchen Equipment Group (representing 18.5% of the reported quarter’s net sales) totaled $133.9 million, decreasing 12.8% year over year. Sales (excluding the impact of forex woes and buyouts) in the quarter declined 9.6%.
Sales from Food Processing Equipment Group (representing 12.3% of the reported quarter’s net sales) were $89.1 million, increasing 1% year over year. Excluding the impact of forex woes and buyouts, sales decreased 9.7% year over year.
Margins in Detail
In the quarter under review, Middleby’s cost of sales rose 0.4% year over year to $454 million. It represented 62.7% of sales compared with 63.4% in the year-ago quarter. Gross profit grew 3.4% year over year to $270 million. Gross margin rose 70 basis points (bps) to 37.3%.
Selling, general and administrative expenses increased 2.2% year over year to $144.5 million. It represented 20% of sales in the reported quarter. Operating income in the quarter under review improved 12.7% year over year to $121.3 million. Operating margin rose 170 bps year over year to 16.8%.
Net interest expenses and deferred financing amortization totaled $20.8 million, up from $19.1 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Middleby had cash and cash equivalents of $87.2 million, up 6.7% from $81.7 million at the end of the last reported quarter. Long-term debt decreased 1.8% sequentially to $1,955.9 million.
In the quarter, the company generated net cash of $128.2 million from operating activities, increasing 21.6% from $105.4 million generated in the year-ago quarter.
Outlook
In the quarters ahead, Middleby anticipates gaining from the focus on product innovation, improving selling techniques, solid offerings to customers and growth markets. Also, various profitability actions will be beneficial.
For Commercial Foodservice Equipment Group, the company expects expansion in international businesses, technologically-advanced products and solutions, effective marketing initiatives, and the increasing adoption of ventless cooking equipment to be beneficial. Also, acquired assets will be boon. However, Brexit-related issues and weak spending by restaurant chains might play spoilsport.
For Residential Kitchen Equipment Group, Middleby anticipates gaining from Viking products as well as focus on product introductions and residential showrooms.
For Food Processing Equipment Group, innovation investment and product launches will likely aid its performance, while issues related to the meat processing line of operations might be concerning.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Middleby has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Middleby has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Middleby (MIDD) Down 5.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Middleby (MIDD - Free Report) . Shares have lost about 5.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Middleby due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Middleby Q3 Earnings Surpass Estimates, Sales Lag
Middleby reported better-than-expected results for the third quarter of 2019, with earnings surpassing estimates by 5.52%. However, sales in the third quarter lagged estimates by 5.02%.
The company’s adjusted earnings in the reported quarter were $1.72 per share, surpassing the Zacks Consensus Estimate of $1.63. Also, the bottom line rose 4.2% from the year-ago quarter figure of $1.65 on benefits from acquired assets and growth in margins.
Revenue Picture
In the quarter under review, Middleby’s sales were $724 million, reflecting year-over-year growth of 1.5%. Organic revenues in the quarter declined 2.9% year over year. Acquired assets grew sales by 5.8% while unfavorable movements in foreign currencies had a negative impact of 1.1%. Closure of non-core business had a negative 0.3% impact.
However, its net sales lagged the Zacks Consensus Estimate of $762 million.
The company reports net sales under three segments. A brief discussion of those segments is provided below:
Sales from Commercial Foodservice Equipment Group (representing 69.2% of the reported quarter’s net sales) were $501 million, increasing 6.2% year over year. Sales, excluding the impact of forex woes and buyouts, grew 0.5% in the quarter.
Sales from Residential Kitchen Equipment Group (representing 18.5% of the reported quarter’s net sales) totaled $133.9 million, decreasing 12.8% year over year. Sales (excluding the impact of forex woes and buyouts) in the quarter declined 9.6%.
Sales from Food Processing Equipment Group (representing 12.3% of the reported quarter’s net sales) were $89.1 million, increasing 1% year over year. Excluding the impact of forex woes and buyouts, sales decreased 9.7% year over year.
Margins in Detail
In the quarter under review, Middleby’s cost of sales rose 0.4% year over year to $454 million. It represented 62.7% of sales compared with 63.4% in the year-ago quarter. Gross profit grew 3.4% year over year to $270 million. Gross margin rose 70 basis points (bps) to 37.3%.
Selling, general and administrative expenses increased 2.2% year over year to $144.5 million. It represented 20% of sales in the reported quarter. Operating income in the quarter under review improved 12.7% year over year to $121.3 million. Operating margin rose 170 bps year over year to 16.8%.
Net interest expenses and deferred financing amortization totaled $20.8 million, up from $19.1 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Middleby had cash and cash equivalents of $87.2 million, up 6.7% from $81.7 million at the end of the last reported quarter. Long-term debt decreased 1.8% sequentially to $1,955.9 million.
In the quarter, the company generated net cash of $128.2 million from operating activities, increasing 21.6% from $105.4 million generated in the year-ago quarter.
Outlook
In the quarters ahead, Middleby anticipates gaining from the focus on product innovation, improving selling techniques, solid offerings to customers and growth markets. Also, various profitability actions will be beneficial.
For Commercial Foodservice Equipment Group, the company expects expansion in international businesses, technologically-advanced products and solutions, effective marketing initiatives, and the increasing adoption of ventless cooking equipment to be beneficial. Also, acquired assets will be boon. However, Brexit-related issues and weak spending by restaurant chains might play spoilsport.
For Residential Kitchen Equipment Group, Middleby anticipates gaining from Viking products as well as focus on product introductions and residential showrooms.
For Food Processing Equipment Group, innovation investment and product launches will likely aid its performance, while issues related to the meat processing line of operations might be concerning.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Middleby has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Middleby has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.