Tuesday, April 29, 2014

Middleby Down to Buy - Analyst Blog

Zacks Investment Research downgraded The Middleby Corporation (MIDD) to a Zacks Rank #2 (Buy) from a Zacks Rank #1 (Strong Buy) on Jul 12 based on the company's operations in Europe, which is still expected to face a difficult economic scenario ahead.

Why the Downgrade?

The company's operations in Europe generate substantial revenues. However, per the company, the economic situation in the region will take sometime to revive. Moreover, the overseas operations of Middleby expose it to foreign currency exchange risks.

Middleby recorded strong results in the first quarter of 2013 with adjusted earnings of $1.65, increasing 37.5% year over year. Revenues for the quarter jumped 43.1% year over year to $327.5 million, primarily led by the Viking acquisition, completed in late December last year.

Viking contributed roughly $58.7 million to the total revenue in the quarter with the total revenue from acquisitions going up to $74.0 million. Apart from Viking, Middleby undertook many acquisitions in the recent past, effectively implementing the company's strategies to grow inorganically.

The company has been expanding geographically too. In the reported quarter, Middleby witnessed a 20% hike in revenues from Latin America, the Middle East and Asia. Management also expects that the above regions will continue to show signs of prosperity along with several other emerging markets.

Middleby has been introducing products and technologies, with a view to achieving a greater market share. The company's Kitchen of the Future is expected to be an instant hit with consumers and will be helpful in increasing the revenues. It is expected that after the launch of 12 products in 2012, Middleby will launch around 13 products in 2013.

Other Stocks to Consider

The following machinery stocks with favorable Zacks Rank are performing well and are worth considering.

Lincoln Electric Holdings Inc. (LECO) carries a Zacks Rank #1 (Strong Buy) Chart Industr! ies Inc. (GTLS) carries a Zacks Rank #2 (Buy) Key Technology, Inc. (KTEC) carries a Zacks Rank #2 (Buy).

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