On Mar 28, 2016, Zacks Investment Research upgraded Middleby Corp. MIDD to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell). Going by the Zacks model, companies carrying a Zacks Rank #3 have better chances of performing in line with the broader market over the upcoming quarters.
Why the Upgrade?
Middleby is boosting revenues on the back of increased demand from chain restaurant customers as well as acquisition benefits. Moreover, the company has a number of product launches lined up, which should support further demand growth.
Also, Middleby is addressing sustainability through food-waste reduction and energy saving measures which should improve margins and earnings. The company is generating higher cash flows from operating activities through better cost saving strategies. The company plans to use the amount to boost shareholders’ return in the near future.
Nevertheless, we remain on the sidelines because of the risks that Middleby faces. The company is largely dependent on the economic conditions in Latin America, Europe, North America and Asia. Sudden recession, exchange-rate fluctuations, political discrepancies and environmental changes in these regions might lower customer spending or availability of credit facility, thereby hurting the company’s revenues and margins.
Moreover, higher interest rates or costs of energy resources might weigh on the company’s financials. Also, intense competition in the industry exposes the company to risks of market share loss.
Stocks to Consider
Some better-ranked stocks within the industry are Sun Hydraulics Corp. SNHY, Colfax Corporation CFX and Nordson Corporation NDSN. Sun Hydraulics sports a Zacks Rank #1 (Strong Buy), while both Colfax and Nordson have a Zacks Rank #2 (Buy).
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