The Company designs, manufactures, markets, distributes and services of a line of cooking equipment and related products used in all types of commercial restaurants, institutional kitchens, and food processing operations.
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The present price places the PE under 20. Fiscal 2011 should see restaurant sales up for the first time in three years.
One of the growth drivers for Middleby’s is the need for restaurants to retrofit their kitchens to increase efficiency. Even if the old oven is working well, new models offer a smaller footprint, higher energy savings and can cook faster. Speed means food gets out faster. Energy savings can be huge for restaurants. It takes a lot of electricity to run restaurant ovens. A small footprint gives companies room to add more equipment to expand their menus to better compete with other restaurants. These new products offered by Middleby that increase energy savings also carry higher margins.
Other companies are working on energy saving ovens and equipment, but the big players such as Manitowoc (MTW) Illinois Tool Works (ITS) and Middleby due to their size should have a big advantage over smaller players and should continue to pick up market share in the industry. They have the experience to build products that not only saves energy but keeps food quality high. Part of Middleby long-term practice was to work with customers to accumulate data on what makes a good oven and they have used the input from a huge customer base to design products that not only make the kitchen more efficient and cheaper to run, but keeps the attributes that keeps food quality high. This is where I think Middleby excels and what makes it tougher for smaller companies to succeed in the industry.
The restaurant industry is expected to make a bit of a comeback in 2011. Fewer restaurant closures and business sales are being reported. This could change if oil prices continue to go up, but fortunately they seem to be going down a bit thanks to higher margins requirements which is derailing speculators. If this trend continues, the restaurant industry may show signs of improvement. Regardless the restaurant survivors will be looking to find ways to give them an edge in costs, faster cooking times or ways to expand their menus to compete with strong competitors. I think this will keep Middleby busy.
Their valuation in my opinion is very good. The PE is 20.88. The cash flow yield is down some, but the first quarter tends to be the weakest for cash flow and they expect to report strong cash flow going forward in 2011. Timing of some orders also may boost cash flow in upcoming quarters. I think it was a good quarter and I look forward to better things as the rest of 2011 is reported.
Tom -
Do you happen to have a MIDD page post you would be willing to/are able to share?
Greg
I am sorry I didn't see your post. My page posts are too long to fit on the Caps page, but here is my assessment to a question about the next quarterly report which is coming up. If you remind me I can post a page post after the next earnings report on the free boards. Just try to remind me. I believe the report is close to being reported.
I was asked if I were trading my shares before the earnings report. My answer was:
I am holding mine. However, if you are worried, you could always lighten your position. In that way if the next earnings report sends it higher, you make some on what you still own. If it goes down, you can rebuy those shares at a lower price.
I have traded partial positions in MIDD before. It is higher than it has ever been. Analysts believe they will make $1.29 for the fourth quarter and $4.59 for the year. If so the PE drops to 21.44.
Presently the price is $98.40 and the PE is 22.2. The last time, the price really was driven down was when the PE was about 23. It was around the price of $91.95 and the PE was 23.16. It was May 11, 2011, the price moved down about $3.00 on the first quarter 2011 earnings report, but continued to fall throughout the quarter, even though the quarter was a good one. The stock fell from $91.95 and fell until it a low of $67.05 on August 9, 2011. The PE bottomed at 16.89. Now if we looked at that, we might think it a good idea to sell today.
But we have to remember something else was happening then too. At the same time the Dow was falling hard also. On August 9, 2011, the Dow was at 10,588.55.
I don't believe the earnings report or the then higher than usual PE of 23 were the main reasons of the fall. I think it was driven down by a weak market. Today we are in a very strong market. So I don't believe their will be much of a reaction to the report. So if it goes down with no help from the Dow, it probably won't stay down long. That is what I believe, so I am holding my shares.
Today many stocks are experiencing PE expansion, so I am not selling. I am more fearful, I may miss a run up than a significant back up.
Thompsonfn estimates February 20 2012:
4Q:2011 $1.29
Fiscal 2011 $4.59
1Q:2012 $1.14
Fiscal 2012 $5.48
November 8, 2011 3Q:2011 earnings’ highlights:
** Revenues were $218.72 million up from $177.793 million
** TTM revenues were $819.427 million or $44.10 per share
** Earnings were $1.26 up from $1.13
** TTM earnings were $4.43
** Diluted share count 18.58 million
** Cash $13.42 million: Debt $303.639 million
** Cash flow for nine months $60.801 million down from $63.148 million
** TTM cash flow was $92.449 million or $4.98
** Interest expense $37.186 million up from $32.011 million
** Gross margins 39.9% up from 39.8% last year: Operating margins were 17% down from 18%.
** Trading range November 8, 2011 and February 20, 2012 was $81.97 to $99.90: PE ratio range was 18.50 to 22.55: PS range 1.86 to 2.27 Cash flow yield range was 4.99% to 6.1%
tom e
thomas engle
TMF Coverage Fool