Middleby (MIDD) Down 3.9% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for The Middleby Corporation (NASDAQ:MIDD) . Shares have lost about 3.9% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is MIDD due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Fourth-Quarter 2017 Results

Middleby reported reports in-line fourth-quarter 2017 adjusted earnings.

Earnings and Revenues

Quarterly adjusted earnings came in at $1.48 per share, in line with the Zacks Consensus Estimate. However, the bottom line came in higher than the year-ago tally of $1.44 per share.

Adjusted earnings for 2017 came in at $6.16 per share, outpacing the Zacks Consensus Estimate of $5.39. Also, the reported figure came in higher than the year-ago figure of $5.10 per share.

Net sales in the quarter under review came in at $632.9 million, up 6% year over year. However, the top line missed the Zacks Consensus Estimate of $647 million. The upswing was backed by favorable foreign currency-translation impact and acquisition benefits.

Net sales of Commercial Foodservice Equipment Group were up 13.7% year over year. However, revenues of the Food Processing Equipment and Residential Kitchen Equipment Groups slipped 1.8% and 5%, respectively.

For full-year 2017, net sales came in at $2,34 billion, up 3% year over year but missed the Zacks Consensus Estimate of $2.35 billion by a whisker.

Costs and Margins

Cost of sales in the fourth quarter was $392.7 million compared with $357.6 million in the year-ago quarter. Gross profit margin came in at 37.9%, declining 220 basis points (bps) year over year. Gross margin dipped in the quarter due to reduced margins secured from acquired businesses.

Selling, general and administrative expenses totaled $110.8 million compared with $110.3 million incurred in the year-ago period. Operating margin came in at 10.9%, contracting 1030 basis points (bps) year over year.

Gross margin for the year was 39.1% slightly lower than 39.7% in the comparable period last year. Operating margin for 2017 came in at 17.6% compared with 19.7% in the year-ago period.

Balance Sheet

Middleby exited the fourth quarter with cash and cash equivalents of $89.7 million than $68.5 million recorded at the end of 2016. Long-term debt was $1,023.7 million compared with $726.2 million as of Dec 31, 2016.

Operating cash flow for 2017 was $304.5 million higher than $294.1 million in 2016.

During 2017, Middleby repurchased shares worth $239.8 million and deployed $300.2 million capital for acquisitions.

Outlook

The company believes elevated demand for chain-restaurant customers will bolster revenues of its Commercial Foodservice Equipment Group. In addition, sturdy demand for the recently-launched products and solutions is anticipated to drive revenues of the Food Processing Equipment and Residential Kitchen Equipment Groups in the near term.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.

The Middleby Corporation Price and Consensus

VGM Scores

At this time, MIDD has a nice Growth Score of B, however its Momentum is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, MIDD has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.