Middleby Misses on Q1 Earnings; Up Y/Y - Analyst Blog

The Middleby Corporation MIDD reported improved year-over-year results for the first quarter of 2014. Earnings came in at $1.78 per share, up roughly 28.1% from $1.39 per share in the year-ago quarter. The increase in earnings was due to improved revenues and margins. However, earnings missed the Zacks Consensus Estimate of $2.07 by 14.0%.

Revenues: Revenues grew 13.8% year over year to $372.5 million, beating the Zacks Consensus Estimate of $361.0 million. The rise in sales primarily resulted from the company's inorganic growth. Excluding the acquisitions, sales increased 8.0% year over year.

Revenues from the Commercial Foodservice Equipment Group rose 18.6% year over year. However, the same increased 9.0% excluding the impact of the acquisitions of Celfrost, Wunder-Bar and Market Forge.

Revenues from the Food Processing Equipment Group climbed 5.9% year over year in the reported quarter.

The Residential Kitchen Equipment Group's revenues were $62.8 million, recording a hike of 7.0% year over year.

Costs/Margins: Middleby's cost of sales in the quarter increased 11.3% year over year to $229.5 million, representing 61.6% of total revenue. Owing to improvement in the Viking margins, gross margin increased nominally to 38.4% from 37.0%.

Selling and distribution expenses, as a percentage of revenues, increased 160 basis points (bps) year over year to 12.6%, while general and administrative expenses decreased 235 bps to 10.8% of total revenue. Operating profit rose 32.6% year over year to $55.9 million, against $42.2 million recorded in the prior-year quarter.

Balance Sheet: Middleby Corporation had cash and cash equivalents balance of approximately $39.1 million at the end of first quarter 2014 versus $36.9 million in the preceding quarter. Long-term debt was $648.5 million, compared with $570.2 million at the end of fourth quarter 2013.

Outlook: Middleby is optimistic of recording higher sales on the back of organic as well as inorganic growth. The company is launching over 50 products, to be available by the end of this year. Additionally, Middleby anticipates acquisitions of Market Forge and Processing Equipment Solutions to enhance the company's results in the coming quarters.

Other Stocks to Consider

Middleby currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks to watch out for in the industry include Gorman-Rupp Co. (GRC), The Babcock & Wilcox Company (BWC) and Broadwind Energy, Inc. (BWEN). While Graco sports a Zacks Rank #1 (Strong Buy), both The Babcock & Wilcox Company and Broadwind Energy hold a Zacks Rank #2 (Buy). 

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