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Kitchen product manufacturer Middleby (NYSE:MIDD) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 4.7% year on year to $991.5 million. It made a non-GAAP profit of $2.39 per share, down from its profit of $2.45 per share in the same quarter last year.
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Middleby (MIDD) Q2 CY2024 Highlights:
- Revenue: $991.5 million vs analyst estimates of $991.2 million (small beat)
- EPS (non-GAAP): $2.39 vs analyst estimates of $2.30 (3.8% beat)
- Gross Margin (GAAP): 38.3%, up from 37.8% in the same quarter last year
- Free Cash Flow of $138.6 million, similar to the previous quarter
- Organic Revenue fell 4.8% year on year (-2.3% in the same quarter last year)
- Market Capitalization: $7.29 billion
Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE:MIDD) is a food service and equipment manufacturer.
Professional Tools and EquipmentAutomation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Regrettably, Middleby's sales grew at a mediocre 6% compounded annual growth rate over the last five years. This shows it couldn't expand in any major way and is a tough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Middleby's recent history shows its demand slowed as its annualized revenue growth of 2.9% over the last two years is below its five-year trend.
We can dig further into the company's sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don't accurately reflect its fundamentals. Over the last two years, Middleby's organic revenue was flat. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline performance.
This quarter, Middleby reported a rather uninspiring 4.7% year-on-year revenue decline to $991.5 million of revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 4% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Middleby has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 16.3%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Middleby's annual operating margin might have seen some fluctuations but has generally stayed the same over the last five years, highlighting the long-term consistency of its business.
This quarter, Middleby generated an operating profit margin of 17.7%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Middleby's unimpressive 6.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. Although it wasn't great, Middleby's two-year annual EPS growth of 6.2% topped its 2.9% two-year revenue growth.
In Q2, Middleby reported EPS at $2.39, down from $2.45 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 3.8%. Over the next 12 months, Wall Street expects Middleby to grow its earnings. Analysts are projecting its EPS of $9.24 in the last year to climb by 10.2% to $10.18.
Key Takeaways from Middleby's Q2 Results It was good to see Middleby beat analysts' revenue and EPS expectations this quarter. Zooming out, we think this was a decent quarter, showing the company is staying on target. The stock traded up 3.1% to $140 immediately following the results.
