The Middleby Corporation (MIDD) recently reported third-quarter 2014 earnings of $1.05 per share, up roughly 43.8% from 73 cents earned in the year-ago quarter, driven by improved revenues and margins. Moreover, earnings surpassed the Zacks Consensus Estimate of 86 cents by 22.1%.
Revenues
Revenues grew 12.3% year over year to $404.3 million but missed the Zacks Consensus Estimate of $409.0 million. The rise in sales was primarily attributable to the company’s inorganic growth. Excluding the benefits of acquisitions during the third quarter, sales of the company increased 7.4%.
Revenues from the Commercial Foodservice Equipment Group rose 13.9% year over year to $262.8 million. Barring the benefits of the Celfrost, Wunder-Bar, Concordia and Market Forge acquisition deals inked by the company, revenues improved 7.5%.
Revenues from the Food Processing Equipment Group were up 5.6% year over year to $75.2 million in the reported quarter. Excepting the returns of the Process Equipment Solutions’ acquisition deal, growth of the segments sales was 1.5%.
The Residential Kitchen Equipment Group’s revenues were $66.3 million, recording a hike of 14.3% year over year.
Costs/Margins
Middleby’s cost of sales in the quarter increased 10.7% year over year to $241.9 million, representing 60% of total revenue. Surplus margin growth of the company’s Food Processing Equipment Group facilitated the marginal improvement of its gross profit margin by 90 basis points (bps).
Selling and distribution expenses, as a percentage of revenues, decreased 120 bps year over year to 10.4%, while general and administrative expenses increased 100 bps to 10% of total revenue. Operating income increased 18.4% in the third quarter, excluding the $6.5 million gain from the patent dispute settlement.
Balance Sheet
Middleby had cash and cash equivalents of approximately $38.1 million at the end of third-quarter 2014, versus $36.9 million at year-end 2013. Long-term debt stood at $506.6 million, compared with $570.2 million at the end of 2013.
Outlook
Middleby hopes to record higher sales on the back of its natural and inorganic growth strategies. Management claims that the company’s aggregate sales growth is currently slowing down due to the long gestation periods of expensive business contracts. Over time, these deals will generate multiplicative positive impacts in commercial affairs of the company.
Other Stocks to Consider
With a market capitalization of $5.07 billion, Middleby currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the industry include Barnes Group Inc. (B), Parker-Hannifin Corporation (PH) and CLARCOR Inc. (CLC), each sporting a Zacks Rank #2 (Buy).
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