Cooking Equipment Company Middleby Misses On Q3 Topline Hit By Inventory De-Stocking, Rising Interest Rate Headwinds

Middleby Corp MIDD reported a third-quarter FY23 net sales decline of 1.2% year-over-year to $980.65 million, -4.4% on an organic basis, missing the consensus of $1.02 billion.

Sales by segments: Commercial Foodservice $634.01 million (+2.3% Y/Y), Residential Kitchen $179.97 million (-18.6% Y/Y), and Food Processing $166.67 million (+9.5% Y/Y).

Adjusted EPS improved by 8% Y/Y to $2.35, beating the consensus of $2.31.

The gross margin expanded by 150 bps to 38.3%. The operating income increased 7.9% Y/Y to $174.44 million, and the margin expanded by 150 bps to 17.8%.

Segment Adjusted EBITDA was $223.68 million, compared to $212.34 million in 3Q22, and the margin expanded by 142 bps to 22.8%.

MIDD's profitability grew to an organic adjusted EBITDA margin of 23% compared to 21.4% in the prior year.

Middleby generated cash from operating activities in Q3 of $219.15 million versus $83.99 million a year ago. Free cash flow of $197.82 million.

The company held cash and equivalents of $167.19 million as of September 30, 2023. Net leverage reduced to 2.75x.

"We are navigating the expected impact of inventory de-stocking at our Commercial Foodservice and Residential Kitchen segments, along with increasing headwinds from rising interest rate affecting near-term demand. Despite the challenging market conditions, we are successfully realizing the benefits from our long-term profitability goals," commented Tim FitzGerald, CEO.

Price Action: MIDD shares traded higher by 2.25% at $117.03 on the last check Wednesday.