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Middleby: This Kitchen Products Maker is Cooking

11/08/2019 5:00 am EST


Douglas Gerlach

President, ICLUBcentral, Inc.

Middleby (MIDD) is a manufacturer or kitchen equipment for both commercial and residential markets, notes Doug Gerlach, editor of SmallCap Informer.

The firm is the largest global manufacturer of commercial cookware. Products are used in restaurants, from quick service to fine dining, and in institutional foodservice such as hospitals and schools.

Customers include YUM! Brands, Subway, Dunkin Brands, Cheesecake Factory, and Papa John’s. Sales make up 65% of total revenues.

Consumers are more likely to be familiar with the company’s residential kitchen equipment divisions, makers of Viking and TurboChef ranges and U-Line refrigeration units. This unit accounts for 21% of revenues.

Approximately $1.0 billion of 2018 revenues were derived outside the U.S., with operations in Brazil, India, Russia, China, Dubai, Saudi Arabia, Australia, and the U.K.

The most recent acquisition of beverage and ice cream dispenser maker Taylor bore fruit in the quarter, adding $0.07 to EPS in the quarter. This was the latest of more than 30 acquisitions of the last five years.

Another key recent initiative is adding “internet of things” technology to its kitchen products, a program that included the acquisition of Powerhouse Dynamics.

The company sees many drivers of future growth, including the opportunity to expand still further internationally and the growth of non-traditional foodservice markets (such as in convenience stores).

Innovative equipment solutions will allow for deployment in smaller or vent-less locations, provide more speed and automation using less energy, and maintain food safety practices.

We expect EPS and revenues to grow as much as 12% annually through 2022. With Middleby’s EPS reaching $10.42 in five years, a high P/E of 23 would indicate a high price of $239.

On the downside, a low P/E of 14 (not seen since 2011) suggests a potential low price of $83. From the current price of $119, the upside/downside ratio is 3.3:1, and a potential annual return of 15.0% is possible.

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