Reasons Why You Should Avoid Betting on Middleby (MIDD) Now
The Middleby Corporation MIDD has failed to impress investors with its recent operational performance due to softness in the Residential Kitchen Equipment Group segment, rising operating costs and foreign-currency headwinds. These factors are likely to impede Middleby’s earnings in the quarters ahead.
Let’s discuss the factors which might continue taking a toll on the firm.
Softness in the Residential Kitchen Equipment Group segment, mainly arising from the inventory destocking and tough end market conditions, is affecting the company’s performance. Also, rising interest rate is worrisome for the segment. In the first six months of 2023, the segment’s revenues declined 30.4% year over year.
Escalating costs pose a threat to Middleby’s bottom line. In the first six months of 2023, the cost of goods sold jumped 3.2%. Selling, general and administrative expenses increased 5.9% in the same period. Supply-chain challenges and inflationary costs were a spoilsport in the first six months of 2023. In the quarters ahead, this Zacks Rank #4 (Sell) company is expected to bear the brunt of the ongoing supply-chain restrictions (especially component parts), labor issues and cost inflation.
Given its widespread presence in international markets, Middleby is exposed to unfavorable foreign currency movements. For instance, foreign exchange losses were approximately $1.3 million in the second quarter of 2023, which negatively impacted adjusted earnings per share by 2 cents per share. An increase in the value of the U.S. dollar, relative to the local currencies of foreign markets, might continue to affect the company's performance in the quarters ahead.
In the past 60 days, the Zacks Consensus Estimate for 2023 earnings has been revised 3% downward.
Due to the above-mentioned woes, the stock has lost 4.1% against the industry’s 16.8% growth in the past year.
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Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Caterpillar Inc. CAT presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
CAT’s earnings surprise in the last four quarters was 18.5%, on average. In the past 60 days, estimates for Caterpillar’s earnings have increased 11.2% for 2023. The stock has gained 42.2% in the past year.
A. O. Smith Corp. AOS presently sports a Zacks Rank of 1. AOS’ earnings surprise in the last four quarters was 10.5%, on average.
In the past 60 days, estimates for A. O. Smith’s earnings have increased 2.9% for 2023. The stock has gained 20.9% in the past year.
Alamo Group Inc. ALG presently carries a Zacks Rank #2 (Buy). ALG’s earnings surprise in the last four quarters was 13%, on average.
In the past 60 days, estimates for Alamo’s 2023 earnings have increased 1.1%. The stock has gained 28.4% in the past year.
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Caterpillar Inc. (CAT) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
The Middleby Corporation (MIDD) : Free Stock Analysis Report
Alamo Group, Inc. (ALG) : Free Stock Analysis Report
