We issued an updated research report on the premium diversified machinery company Middleby Corp. MIDD on Feb 29, 2016. The company provides cooking, warming, food preparation and packaging equipment for commercial, industrial processing and residential markets. Since 1983, Middleby has significantly improved the scale of its operations on the back of strategic moves. However, it currently faces certain external headwinds.
Existing Hurdles
Middleby's commercial prosperity largely depends on the health of the Latin American, European, North American and Asian economies. Sudden recession in any of these economies might adversely affect the company's revenues and margins through lower customer spending or reduced availability of credit facility. The company makes concerted efforts to improve its revenues and margins by expanding its business on a global scale. However, the company's foreign operations are exposed to headwinds related to exchange-rate fluctuations, political discrepancies and environmental changes. Moreover, Middleby conducts its trade in a highly competitive diversified machinery industry. Industry rivalry exposes the company to risks of market share loss. Price fluctuations of raw materials often expose Middleby to risks of margin or profitability loss.
Ray of Hope
We anticipate the abovementioned negatives to continue weighing on this Zacks Rank #4 (Sell) stock’s top- and bottom-line results in the near term. Nevertheless, certain tactical initiatives undertaken by the company and favorable demand conditions might partially offset the impact of such adversities. For instance, the superior performance of Commercial Foodservice Equipment Group and Residential Kitchen Equipment Group has been buoying Middleby’s top-line growth in recent times. The impressive performance is attributable to the growing demand from chain-restaurant customers as well as acquisition benefits of the company. Moreover, the company is slated to launch new products in the upcoming quarters, which will support further growth in demand, going forward.
Other Stocks to Consider
Some better ranked stocks within the industry include Graco Inc. GGG, Kaman Corporation KAMN and Nordson Corporation NDSN. All the three companies currently hold a Zacks Rank #2 (Buy).
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