Reasons Why You Should Avoid Betting on Middleby Stock Right Now

The Middleby Corporation MIDD has failed to impress investors with its recent operational performance due to weakness across its businesses and high debt levels.Based in Elgin, IL, the company provides cooking, warming, food preparation and packaging equipment to commercial, industrial processing and residential markets.Let us discuss the factors that continue to take a toll on the firm.Factors Affecting MiddlebyBusiness Weakness: Lower demand for residential kitchen products due to weakness in the housing market, amid lower existing and new home sales, is affecting the performance of the Residential Kitchen Equipment Group segment. Also, tough market conditions, both domestically and in Europe, remain concerning for the segment. This is reflected in the segment’s results, which declined 3.8% year over year in the third quarter of 2024, following a 6.2% decline in the second quarter.Also, softness in the restaurant industry, due to declining traffic, is affecting the demand for the company's products within the Commercial Foodservice Equipment Group segment. High wages and recent food cost inflation have pressured restaurant operators, leading to delayed investments and more restaurant closures, which are alarming for the segment as well. The segment’s revenues declined 4.1% and 5.3% year over year in the second and third quarters of 2024, respectively.MIDD Stock’s Price Performance Image Source: Zacks Investment Research Over the past year, the Zacks Rank #4 (Sell) company has gained 3.2% compared with the industry’s 15.4% growth.High Debt Level: The company’s highly leveraged balance sheet remains a concern. Exiting third-quarter 2024, the metric remained high at $2.36 billion. Also, the stock looks more leveraged than the industry. Its long-term debt/capital ratio is currently 0.40, higher than 0.36 of the industry. It is worth noting here that Middleby, in October 2021, amended its credit agreement, increasing its size to $4.5 billion from the previous $3.1 billion. The credit facility included a revolving credit facility, term loan and delayed draw-term loan. We believe that such offerings will add to its debt load and increase its financial obligations.Forex Woes: With MIDD’s operations spread globally, its business is exposed to risks arising from geopolitical issues, adverse movement in foreign currencies and governmental policies. In the third quarter of 2024, forex woes negatively affected the Commercial Foodservice segment’s sales by 0.1%.Downward Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for MIDD’s fourth-quarter 2024 earnings has trended down by a penny to $2.51 per share. Also, the consensus estimate for its 2025 earnings decreased by a penny to $9.62 per share.Stocks to ConsiderSome better-ranked stocks from the same space are discussed below.Graham Corporation GHM presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.GHM delivered a trailing four-quarter average earnings surprise of 101.9%. In the past 60 days, the Zacks Consensus Estimate for Graham’s fiscal 2025 (ending March 2025) earnings has been stable.Applied Industrial Technologies, Inc. AIT currently carries a Zacks Rank #2 (Buy). AIT delivered a trailing four-quarter average earnings surprise of 5%.In the past 60 days, the consensus estimate for AIT’s fiscal 2025 (ending June 2025) earnings has inched up 0.1%.Chart Industries GTLS presently carries a Zacks Rank of 2. In the past 60 days, the consensus estimate for GTLS’ 2024 earnings has increased 1.2%.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report The Middleby Corporation (MIDD): Free Stock Analysis Report Graham Corporation (GHM): Free Stock Analysis Report Chart Industries, Inc. (GTLS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks