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Middleby (MIDD) Tops Q1 Earnings, Misses Sales Estimate

Zacks Equity Research

Machinery behemoth, The Middleby Corporation MIDD reported mixed first-quarter 2017 results.

On a month-to-date basis, shares of this Zacks Rank #2 (Buy) stock yielded a return of 1.04%, outperforming 0.52% growth recorded by the Zacks categorized Machinery-General Industrial industry.

The company intends to boost its profitability on the back of increased focus on price discipline. In addition, ongoing initiatives to enhance the recently developed residential business platform are likely to generate positive results in the upcoming quarters.

Quarter in Details

The company’s quarterly adjusted earnings (excluding the impact of restructuring expenses of 2 cents per share) came in at $1.26 per share, handily beating the Zacks Consensus Estimate of $1.13. The bottom line also came higher than the year-ago tally of 97 cents per share.

Net sales during the quarter came in at $530.3 million, up 2.7% year over year. However, the top line missed the Zacks Consensus Estimate of $543 million. The company noted that though increased sales accrued from acquired businesses bolstered sales in the quarter, foreign currency translation adversely affected the same.

Segmental Details

Revenues from the Commercial Foodservice Equipment Group increased 11.9% on a year-over-year basis to $312.2 million.

Revenues from the Food Processing Equipment Group dipped 1.7% year over year in the quarter to $77.3 million.

Revenues from the Residential Kitchen Equipment Group declined 11.3% year over year to $140.8 million.

Costs and Margins

Cost of sales in the quarter was $320.8 million compared to $319.6 million recorded in the year-ago quarter. Gross profit margin in the reported quarter was 39.5%, up 140 basis points (year over year). The upside was driven by increased profitability of the company’s Residential Kitchen Equipment Group and AGA Group businesses.

Selling, general and administrative expenses were $106.6 million as against $109.8 million in the year-ago period. Operating margin came in at 19.1%, expanding 240 bps year over year.

Balance Sheet

Middleby exited the first quarter with cash and cash equivalents of $76.6 million as against $68.5 million recorded at the end of 2016. Long-term debt was $723.7 million compared with $726.2 million recorded as on Dec 31, 2016.

Outlook

Product innovations are likely to boost Middleby’s Commercial Foodservice Equipment and Residential Kitchen Equipment Group’s revenues in the upcoming quarters. Furthermore, the strategic buyout of Burford Corporation (May 2017) is anticipated to bolster near-term sales of the Food Processing Equipment Group.

Other Key Picks

Some other top ranked stocks in the industry are listed below:

Caterpillar Inc. CAT has a positive average earnings surprise of 40.25% for the trailing four quarters and flaunts 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, which currently sports a Zacks Rank #1, generated an average earnings surprise of 9.78% over the last four quarters.

Avery Dennison Corporation AVY holds a Zacks Rank #2 and has an average earnings surprise of 5.53% for the past quarters.

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