1Q13 Earnings Surpass Est. at Middleby

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The Middleby Corporation (MIDD) reported impressive results for the first quarter 2013. Earnings per share came in at $1.65, up roughly 37.5% from $1.20 reported in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of $1.30.  

The above mentioned earnings exclude certain charges related to The Middleby Corporation’s acquisition integration initiative, excluding which earnings per share in the first quarter of 2013 come to $1.39.

Revenue

Revenue generated by The Middleby Corporation increased 43.1% year over year to $327.5 million and above the Zacks Consensus Estimate of $314.0 million. This includes revenue contributions from Viking and the recent acquisitions to the tune of $74.0 million.

As a result of the acquisition of Viking Range Corporation in Dec 2012, the company added a new segment— Residential Kitchen Equipment Group to its existing two segments. The new segmental reporting is effective from the first quarter 2013, a brief discussion on which is provided below:

In the reported quarter, revenue from Commercial Foodservice Equipment Group increased 10.7% year over year while an increase of 8.6% was recorded excluding the impact of the acquisition of Nieco.

Revenue from Food Processing Equipment Group soared 41.4% year over year in the quarter, aided by the acquisitions of Baker Thermal Solutions in Jul 2012 and Stewart Systems in Sep 2012. Excluding this, the revenue grew 18.4% year over year.

Revenue from Residential Kitchen Equipment Group was $58.7 million.

Margins

The Middleby Corporation reported a 45.9% year-over-year increase in its cost of sales, which also represented 63.0% of total revenue. Gross margin received a set-back and plummeted from 38.2% to 37.0% while excluding the Viking Range acquisition, it came in at 38.9%.
 
Selling and distribution expenses, as a percentage of revenue, were relatively flat year over year at 11.0% while general and administrative expenses surged 190 basis points. Operating margin, excluding the impact of the acquisition integration initiative charges, was at 15.0% versus 16.0% in the year-ago quarter.

Balance Sheet

The Middleby Corporation had a cash and cash equivalents balance of approximately $43.8 million, up 27.4% sequentially exiting the first quarter 2013. Long-term debt more than doubled from $258.2 million to $636.8 million.  

Outlook

The Middleby Corporation is hopeful that the demand for its cost and energy saving equipment would rise in the quarters ahead, considering the persistent rise in labor costs. Also, management is optimistic that the acquisitions undertaken would significantly boost revenue growth in the future.

The Middleby Corporation is one of the leading food service and processing equipment makers and has operations in the United States, Canada, Asia, Europe, the Middle East, and Latin America.

The Middleby Corporation currently has a market capitalization of $2.8 billion and also carries a Zacks Rank #2 (Buy).

Other stocks to watch out for in the industry are Altra Holdings Inc. (AIMC), Graco Inc. (GGG) and Tri-Tech Holding, Inc. (TRIT), each carrying a Zacks Rank #1 (Strong Buy).
 

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