Middleby's (MIDD) Q3 Earnings Miss Estimates, Revenues Beat

Machinery behemoth The Middleby Corporation (NASDAQ:MIDD) reported mixed results for third-quarter 2017.

Earnings and Revenues

The company’s quarterly adjusted earnings (excluding the impact of restructuring expenses of 5 cents per share) came in at $1.36 per share, missing the Zacks Consensus Estimate of $1.41. However, the bottom line came ahead of the year-ago tally of $1.34 per share.

Net sales during the quarter came in at $593 million, up 3.3% year over year. The upside stemmed from higher sales generated on the back of recent acquisitions and favorable foreign currency-translation impact.

Also, the top line surpassed the Zacks Consensus Estimate of $588 million.

Segmental Details

Revenues from the Commercial Foodservice Equipment Group were up 7% on a year-over-year basis to $354.8 million.

Revenues from the Food Processing Equipment Group improved 5.7% year over year in the quarter to $86.9 million.

Revenues from the Residential Kitchen Equipment Group declined 5.7% year over year to $151.3 million.

Costs and Margins

Cost of sales in the quarter was $364.5 million compared to $342.5 million recorded in the year-ago quarter. Gross profit margin in the reported quarter came in at 38.5%, contracting 190 basis points (bps) year over year. This stemmed from the uncomplimentary product mix of the Commercial Foodservice Equipment Group and lesser margins secured from the company’s recently closed acquisitions.

Selling, general and administrative expenses were $106 million, as against $109.1 million incurred in the year-ago period. Operating margin came in at 19.9%, descending 120 bps year over year.

Balance Sheet

Middleby exited the third quarter with cash and cash equivalents of $81.7 million, as against $68.5 million recorded at the end of 2016. Long-term debt was $945.5 million compared with $726.2 million recorded as of Dec 31, 2016.

During the reported quarter, Middleby repurchased nearly 1.7 million shares with $200.4 million.

Outlook

Middleby believes robust demand and product innovations will bolster revenues of its Commercial Foodservice Equipment Group, going forward. In addition to this, Globe Food Equipment Company (October 2017) and QualServ Solutions, LLC (August 2017) acquisitions are anticipated to drive the segment’s revenues in the quarters ahead. On the other hand, recent investments made over the Viking brand are likely to enhance the Residential Kitchen Equipment Group’s performance in the near term.

However, the company fears that continued delays of large orders might dent near-term revenues of its Food Processing Equipment Group.

Middleby expects that appropriate integration of the recently acquired businesses and better-than-expected top-line performance will boost its profitability from 2018.

Zacks Rank & Other Stocks to Consider

Middleby currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are listed below:

TASER International, Inc. (NASDAQ:AAXN) currently carries a Zacks Rank of 2 (Buy) and has a positive average earnings surprise of 45.61% for the last four quarters. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Acco Brands Corporation (NYSE:ACCO) also holds a Zacks Rank of 2 and pulled off a positive average earnings surprise of 81.89% over the trailing four quarters.

Altra Industrial Motion Corp. (NASDAQ:AIMC) carries a Zacks Rank of 2 and recorded a positive average earnings surprise of 17.30% during the same time frame.

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