Long-term stock pick Middleby disappoints the buy-on-the-dippers with blow out earnings

08/08/2013 7:55 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

So much for getting to buy on a weak quarter.

Wall Street analysts had Middleby (MIDD) pegged to deliver just 6.6% year over year earnings growth when it the company reported second quarter results today, August 8, after the close.

If the company did produce such an atypical low growth quarter, I’d buy on the dip I wrote on August 5 http://jubakpicks.com/2013/08/05/i-added-middleby-to-my-long-term-portfolio-on-may-3-heres-why-and-why-we-might-get-a-very-rare-buying-opportunity-this-week/

But Middleby disappointed anyone waiting for a disappointment. The company beat Wall Street projections for $1.78 a share in earnings by 22 cents a share. Instead of a paltry 6.6% increase in earnings, Middleby turned in 19.8% year over year earnings growth. Revenue climbed almost 40% to $363.8 million versus the $344.3 million Wall Street consensus. Excluding acquisitions sales grew by 10.7% year over year.

Middleby shares were up 1.99% in the after-hours market today.

Sales at Middleby’s Commercial Foodservice Equipment Group climbed 13.5% or 11% excluding Middleby’s acquisition of Nieco, which closed in fiscal 2012. Sales for the company’s Residential Kitchen Equipment Group came to $58.8 million in the quarter. Net sales at the Food Processing Equipment Group, which I pointed to as a key growth opportunity for Middleby, climbed 29% in the quarter from a year earlier or 9.4% excluding the acquisition of Stewart Systems in 2012.

Gross profit margin fell in the quarter because of lower gross margins at acquisition Viking. Excluding the effect of that acquisition, gross margins fell slightly to 38.9% from 39.2%.

Middleby is a member of my long-term Jubak Picks 50 portfolio http://jubakpicks.com//

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did not own shares of Middleby as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/.
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