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Middleby Corp. Message Board

  • mr_dysfunctional_4u mr_dysfunctional_4u Jun 18, 2008 1:47 AM Flag

    MIDD now and near term Update

    First let me say I am slightly annoyed by some of the replies to my previous post. If anyone cared to look, they would find I have been very "PRO" Middleby for quite some time. I have Bought, held and sold twice. I am thankful for a nice profit both times. My last sale was at $68 and change. I agree 100% that MIDD is an outstanding long term play. (As much as 70% from here)

    In order to maintain income at max levels during this slowdown, MIDD will work hard to raise productivity and reduce costs. This will indeed reward share price when CONDITIONS return MIDD to favor. I guess the question of when MIDD "returns to favor" is the question that has raised some emotion from fellow MIDD supports. Whether MIDD is a buy at 48 becomes the same question asked at 58. It sure is a better buy and whatever your time frame is I think 20% downside risk is all there is left. Would I buy now or encourage others to do the same? Not yet. Will I buy again...count on it.

    Just the humble thoughts of a current CEO, Former Broker, and avid 401k trader

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    • I agree with you 100%. Bought Middlebys at 3.50 a share along time ago and am still impressed with the management of this company. Sales are going to be down with the price of flour being at this level.

    • My continued optimism in MIDD is based on the conference call after the last quarterly results were released. While the CFO and Selim acknowledged uncertainty associated with steel price increase as well as customer reticence to purchase new capital equipment, they did assert that over the next three years they will grow EPS at a 25% clip. For this year, they predicted the slowing down would put them more at a 18-20% increase. Given MIDDs record of meeting or beating analyst estimates in the past 8 quarters, I a confident they will atleast have a 15% growth in earnings over the $3.14 EPS they reported last year. This would put them at $3.60 for this year, and even if you use their lowest historical P/E multiple of 12, they should not be valued below $43.

      My belief is that any price below $43 is a perfect time to buy and hold for a year.


    • I agree with your thesis, your appraisal and your affection for MIDD, but I would add some more points. First, the steel price increases you cite are extraordinary, almost 80% YTD, with another doubling in sight as a result of BHP's new annual sales agreement with the Chinese. Customers will balk if MIDD tries to flow them through--as you point out, MIDD's customers have problems of their own.

      Second, MTW today entered the winning bid for Enodis (see today's WSJ, p B4). MTW is about four times larger than MIDD in market cap; even so, this was a BIG acquisition for them and likely signals a change in their direction. They will soon have the size and financial muscle to compete more effectively with MIDD, and to discount prices--which is what the MIDD CEO was saying customers want, in his last CC.

      Third, the STAR acquisition has loaded MIDD with lots of debt, limiting their ability to respond to strong competition from MTW, or from ITW for that matter.

      PE multiples are of limited value in a market like this one--I think MIDD will see the $30's before it sees the $50's. That will happen after they announce 2Q sales and earnings, which are likely to disappoint--and look what happened when they merely MET expectations in 1Q.

      MIDD is very well run, has made the right moves for several years, but I believe Selim Bassoul knows he has only a short time to bulk this company up enough to survive the consolidation of his competitors. That's why he made the original Enodis offer--it was a defensive move.

      Last, there is a difference between the company and the stock. The company will very likely survive, but the stock will be punished even more than it has been already.

      I'm looking for a re-entry point, but that point will not come until some of my fears go away and I can see their future more clearly. The stock price will be less important at that point than its direction.

    • Trying to call a bottom is just plain gambling. By the time you feel comfortable with the economy, the stock may already be back over $55.

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