Can Middleby Follow Through After Beating Low Expectations?

You never really can tell just what Wall Street will decide to focus on when it comes to a company undergoing a turbulent transition period. In the case of Middleby (MIDD) and its second quarter earnings, it seems as though the Street was happy to look past weaker-than-expected EBITDA (a 6% miss on already-lowered expectations) and gross margin and focus on a small revenue beat and a generally more constructive tone from management.

I had some interest in Middleby earlier this year as it slid toward $100, and I wouldn’t call today’s valuation unreasonable, although it is trading for more than I’d care to pay on both a DCF and EV/EBTIDA basis. If Middleby can maintain, or improve upon, the best results seen in the Commercial Foodservice and Residential businesses in years, I expect these shares to trade higher, but the weaker margins are a concern, and I’m not completely sold that the organic growth issues are fixed.

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Can Middleby Follow Through After Beating Low Expectations?