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Middleby (MIDD) Beats on Q4 Earnings & Revenue Estimates

Machinery behemoth, The Middleby Corporation MIDD reported better-than-expected fourth-quarter 2016 results.

However, over the last three months, shares of this Zacks Rank #4 (Sell) stock yielded a return of 0.80% – underperforming 6.67% gain provided by the Zacks categorized Machinery-General Industrial industry.

Earnings

The company’s quarterly adjusted earnings of $1.41 cents per share surpassed the Zacks Consensus Estimate of $1.27. In addition, the bottom line considerably improved from the prior-year tally by 60.2%. The impressive year-over-year growth was primarily backed by higher sales and productive integration initiatives undertaken by the company.

For full-year 2016, adjusted earnings came in at $4.98 per share as against $3.36 per share reported in full-year 2015.

Revenues

Net sales for the quarter came in at $596.8 million, up 11.6% year over year. The upside was driven by higher sales accrued from Middleby’s acquired businesses. The top line also surpassed the Zacks Consensus Estimate of $574 million.

For full-year 2016, net sales came in at $2,267.9 million, up 24.2% year over year.

Segmental Details

Middleby reports its net sales under three heads/segments. The segmental quarterly results are briefly discussed below:

Revenues from the Commercial Foodservice Equipment Group increased 20.2% on a year-over-year basis. Revenues from the Food Processing Equipment Group jumped 19.7% year over year in the quarter. However, revenues from the Residential Kitchen Equipment Group declined 5.9% year over year.

Margins

In the reported quarter, Middleby’s cost of sales climbed 6.5% year over year to $357.6 million. Gross margin expanded 290 basis points (bps) year over year to 40.1%, on the back of the benefits generated from the company’s integration initiatives.

Selling and distribution expenses came in at $55.6 million, down 1.5% year over year. Operating income surged 74.2% year over year to $126.5 million.

For full-year 2016, gross margin came in at 39.7% as against 38.7% recorded in the year-ago period. Operating income totaled $446.2 million, up 47.5% year over year.

Balance Sheet

Middleby exited the fourth quarter with cash and cash equivalents of $68.5 million as against $55.5 million recorded at the end of 2015. Long-term debt was $726.2 million compared with $734 million reported at the end of 2015.

Outlook

Middleby believes that solid demand of restaurant chain customers would likely boost sales of the Commercial Foodservice Equipment Group segment in the quarters ahead. Fresh product launches of the Viking range and superior customer services are expected to reinforce revenue of the company’s Residential Kitchen Equipment Group. Also, higher demand for novel equipment solutions is estimated to drive revenue of Middleby’s Food Processing Equipment Group in the near term.

Key Picks

Some better-ranked stocks within the industry are listed below:

ACCO Brands Corporation ACCO has an average earnings surprise of +24.74% for the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies, Inc. AIT carries a Zacks Rank #2 (Buy) and has an average earnings surprise of +6.18% for the trailing four quarters.

Avery Dennison Corporation AVY also holds a Zacks Rank #2 and has an average earnings surprise of +6.17% for the past quarters.

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