Middleby Rides Inorganic Growth Trajectory on Desmon Buy - Analyst Blog

Premium diversified machinery firm Middleby Corporation (MIDD) has recently acquired Italy-based Desmon Food Service Equipment Company for an undisclosed amount. Through the deal, Middleby aims to enhance kitchen efficiency solutions for its household and corporate customers. With Desmon's freezing technology suitably complementing the combi-oven platform of Middleby, the buy comes as a strategic extension of its inorganic growth plans.

Acquisition Benefits  

The acquisition would help Middleby leverage the growing market demand for blast chilling products, which keep frozen food fresh by retaining the nutrients within them. By tapping the business demand and household customers of this famous European professional refrigerating company, Middleby would be able to improve its revenue and margins in the upcoming quarters. The blast chilling products of Desmon, combined with Middleby's combi-oven products, would make cooking less costly by improving the overall energy efficiency. With such modernized tools, the users would be able to prepare healthier menus.

Acquirer

Middleby has been conducting business in the cooking equipment industry since 1988. The company designs, produces and markets diversified equipments for food servicing and processing, as well as residential cooking. The company enjoys a high brand value in the market. Few days back, Middleby boosted its residential business platform by entering into an agreement with U-Line Corporation for acquiring the latter's innovative and productive business lines. Further, through acquisition of firms such as Viking Range Corporation, Concordia Coffee Company Inc. and Process Equipment Solutions, Middleby has substantially expanded the scale of its operations over the years.

Acquiree

Desmon, a prominent chilling and freezing technology provider, generates annual revenues of roughly $15 million. The headquarters of the company is located in Nusco, Italy. The company's products, manufactured on the basis of its energy efficiency and modern insulating technology, are popular and non imitable.

Insights

In the last reported quarter, Middleby's adjusted earnings surpassed the year-ago value by 43.8% and the Zacks Consensus Estimate by 22.1%. With 12.3% year-over-year revenue growth, the company has maintained a strong outlook for upcoming earnings. Expecting the company's inorganic growth plans to augment its revenue and margins in near future, investors' sentiments will likely be optimistic toward the stock.

With a market capitalization of $5.52 billion, Middleby currently sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the industry include Blount International Inc. (BLT), Sun Hydraulics Corp. (SNHY) and The Babcock & Wilcox Company (BWC). While both Blount International and Sun Hydraulics both carry a Zacks Rank similar to Middleby, Babcock & Wilcox Company holds a Zacks Rank #2 (Buy).