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Middleby (MIDD) Q3 Earnings Miss Estimates, View Encouraging

Machinery behemoth The Middleby Corporation MIDD reported weaker-than-expected results for third-quarter 2018. However, the quarterly results of the company improved on a year-over-year basis. This Zacks Rank #2 (Buy) stock valued $116.53 per share as of Nov 8, nearly flat since the after-market release of its third-quarter earnings on Nov 7.

Earnings/Revenues 

Quarterly adjusted earnings came in at $1.56 per share, up 14.7% year over year. However, the bottom-line figure missed the Zacks Consensus Estimate by a penny. The company noted that restructuring expenses and higher interest costs weighed over quarterly earnings. Notably, including the impact of these expenses, Middleby’s adjusted earnings remained flat year over year at $1.31 per share in the third quarter.

Net sales in the reported quarter came in at $$713.3 million, up 20.3% year over year. The upswing was driven by the benefits secured from newly-made acquisitions and the Accounting Standards Codification 606 adoption. However, we notice that unfavorable foreign currency-translation impact hurt the company’s revenues in the reported quarter.

Middleby’s third-quarter revenues missed the Zacks Consensus Estimate of $727 million.

Segmental Break-Up

Net sales of the Commercial Foodservice Equipment Group surged 32.9% year over year to $471.6 million in the quarter under review. The Residential Kitchen Equipment Group’s revenues inched up 1.4% year over year to $153.5 million. The Food Processing Equipment Group’s revenues improved 1.6% year over year to $88.2 million.

The Middleby Corporation Price, Consensus and EPS Surprise

 

The Middleby Corporation Price, Consensus and EPS Surprise | The Middleby Corporation Quote

Costs/Margins

Cost of sales in the third quarter was $452.2 million compared to $364.5 million recorded in the year-ago quarter. Gross profit margin in the quarter came in at 36.6%, shrinking 190 basis points (bps) year over year. Gross margin in the Sep-end quarter dipped primarily due to reduced margins secured from the acquired businesses.

Selling, general and administrative expenses totaled $141.4 million, higher than $114.9 million recorded in the year-ago period. Operating margin came in at 15.1%, contracting 340 bps, year over year.

Balance Sheet/Cash Flow

Middleby exited the third quarter with cash and cash equivalents of $76.6 million, as against $89.7 million recorded at the end of 2017. Long-term debt was $1,955.2 million compared with $1,023.7 million recorded as of Dec 30, 2017.

In the first nine months of 2018, the company’s operating cash flow stood at $252 million, up from $204.9 million recorded in the year-ago period. Capital expenditure was $32.6 million, down 23.3% year over year.

Outlook

Middleby believes the recently-made acquisitions will bolster its revenues and profitability in the upcoming quarters. The company also anticipates that the ongoing restructuring moves and product launches will aid in boosting its competency, going forward.

Other Stocks to Consider

Some other top-ranked stocks in the Zacks Industrial Products sector are listed below:

Atkore International Group Inc. ATKR sports a Zacks Rank #1 (Strong Buy), at present. The company generated an average positive earnings surprise of 24.46% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Donaldson Company, Inc. DCI carries a Zacks Rank #2 (Buy), currently. The company delivered an average positive earnings surprise of 2.29% in the preceding four quarters.

Currently, Rockwell Automation, Inc. ROK also holds a Zacks Rank of 2. The company came up with an average positive earnings surprise of 7.00% during the same time frame.

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