We issued an updated research report on the premium diversified machinery company Middleby Corp. MIDD on Mar 2, 2017.
Over the last one month, shares of this Zacks Rank #3 (Hold) yielded a 6.55% return – outperforming the gain of 2.09% provided by the Zacks categorized Machinery-General Industrial industry.
Existing Scenario
Middleby’s fourth-quarter 2016 revenues surpassed the Zacks Consensus Estimate by roughly 4% and the year-ago tally by 11.6%. The upside was driven by stellar top-line performance accrued from both the Commercial Foodservice Equipment and Food Processing Equipment segments. Higher demand from emerging markets and sturdy sales accrued from chain restaurant customers supported the upside. The company believes that stronger demand for its innovative products would continue to boost revenues in the quarters ahead.
Notably, Middleby intends to enhance its bottom-line performance on the back of lower costs and greater operational efficacy. In sync with this motto, the company has been implementing several strategic restructuring initiatives, undertaking product rationalization efforts and reducing headcounts in business.
Moreover, Middleby aspires to become an undisputed leader in the global foodservice equipment industry. To this end, the company has been making concerted efforts to expand inorganically worldwide. For instance, in May 2016, Middleby completed the acquisition of Emico Automated Bakery Equipment Solutions and Follett Corporation. The company believes that these two buyouts would fortify its growing beverage business and hence, assist in capturing higher demand from restaurant chain customers in the near term.
However, foreign business exposure increases the incidence of economic and geopolitical risks for the company. For instance, the company’s fourth-quarter 2016 revenues plummeted by $21.9 million due to adverse foreign exchange impact. Henceforth, further appreciation of U.S. dollar would continue to hurt Middleby’s revenues moving ahead. Also, each business segment of the company faces stiff competition. Extensive business rivalry increases the bargaining power of customers and thus, exposes Middleby to risks of market share loss. In order to retain competitive power, the company is forced to incur heavy innovation investments, which add to its aggregate debt level. Also, price fluctuations of raw materials often expose it to risks of margin or profitability loss.
Over the last seven days, the Zacks Consensus Estimate for the stock remained unchanged for both 2017 and 2018, reflecting neutral stance of the market toward the stock.
Stocks to Consider
Better-ranked stocks from the same space are listed below:
ACCO Brands Corporation ACCO has an average earnings surprise of +24.74% for the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies, Inc. AIT carries a Zacks Rank #2 (Buy) and has an average earnings surprise of +6.18% for the trailing four quarters.
Avery Dennison Corporation AVY also holds a Zacks Rank #2 and has an average earnings surprise of +6.17% for the past quarters.
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