Update Middleby (MIDD)

03/08/2010 1:52 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Has Middleby (MIDD) finally moved off the back burner?

Middleby’s shares were up 29% from February 8 through March 5, and the relative strength on the stock has moved to 72 for the last three months from 56 over the last six months. (Relative strength measures how a stock’s price performance compares to all other stocks on the market in the period. A relative strength of 72, for example, means the stock has outperformed 72% of all stock during the period.)

The market was anticipating that orders from the commercial food service industry—everything from fast food restaurants to school lunchroom kitchens—will finally first stabilize and then turn upward in 2010.

The company’s earnings report on March 3 vindicated that anticipation.

Middleby reported earnings of 95 cents a share, 10 cents a share better than the Wall Street consensus. Revenue for the quarter including acquisitions actually climbed by 1% to $152.5 million. If you take out the effect of acquisitions, sales fell by 12%.

The company said that several orders deferred by customers in 2009 were finally released in early 2010. Based on that and other signs Middleby said that it sees initial signs of recovery in its industry.

The company will be in better shape within that industry when the recovery does arrive. Middleby has continued to use its cash flow--$101 million in operating cash flow in 2009—to make small acquisitions ($133 million worth in 2009 ) to build share in the very fragmented commercial foodservice equipment industry. The latest deal closed in December when Middleby acquired Canadian baking oven maker Doyon Equipment for $4 million. Doyon had $15 million in sales in 2009.

The company also used cash flow to pay down another $20 million in debt during the fourth quarter.

As of March 8, 2010 I’m leaving my target price at $65 a share by November 2010.

Full disclosure: I own shares of Middleby in my personal portfolio.

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