Middleby's Inventory Destocking Process To Mute Revenue Expectations Till Q4, Analyst Cautions

Benchmark analyst Todd M. Brooks reiterated a Buy rating on The Middleby Corporation MIDD, lowering the price target to $170 from $180.

The company recently reported 2Q23 quarterly results, reflecting largely in-line revenue performance driven by strength in the Food Processing segment.

In Commercial Foodservice, new unit construction from larger chain restaurant customers has fueled the strong demand trends, especially in international markets, Brooks notes. 

For Commercial Foodservice, MIDD is still tracking toward achieving the 30% segment margin goal exiting FY25 (FY22 EBITDA margin reported at 25.1%, while analyst's estimated FY23 margin rises to 27.6%)

Demand has broadened out from large QSR customers, with MIDD seeing increased demand from Casual Dining operators and independent restaurants. 

The Residential Kitchen segment should see revenues bottom in 3Q23 before building again in 4Q23 on a pickup in grill demand before the FY24 season.

The analyst notes that the inventory destocking process in both Residential Kitchen and Commercial Foodservice dealers will likely continue through 3Q23, muting revenue expectations somewhat before an anticipated normalization in demand trends into 4Q23.

The analyst lowered FY23 revenue estimates from $4.22 billion to $4.15 billion.

For FY24, the analyst lowered revenue estimates from $4.45 billion to $4.34 billion.

Price Action: MIDD shares are trading higher by 2.88% to $146.66 on the last check Monday.