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Update Middleby (MIDD)

March 8, 2010 @ 1:52 pm | Update | 17 comments

Has Middleby (MIDD) finally moved off the back burner?

Middleby’s shares were up 29% from February 8 through March 5, and the relative strength on the stock has moved to 72 for the last three months from 56 over the last six months. (Relative strength measures how a stock’s price performance compares to all other stocks on the market in the period. A relative strength of 72, for example, means the stock has outperformed 72% of all stock during the period.)

The market was anticipating that orders from the commercial food service industry—everything from fast food restaurants to school lunchroom kitchens—will finally first stabilize and then turn upward in 2010.

The company’s earnings report on March 3 vindicated that anticipation.

Middleby reported earnings of 95 cents a share, 10 cents a share better than the Wall Street consensus. Revenue for the quarter including acquisitions actually climbed by 1% to $152.5 million. If you take out the effect of acquisitions, sales fell by 12%.

The company said that several orders deferred by customers in 2009 were finally released in early 2010. Based on that and other signs Middleby said that it sees initial signs of recovery in its industry.

The company will be in better shape within that industry when the recovery does arrive. Middleby has continued to use its cash flow–$101 million in operating cash flow in 2009—to make small acquisitions ($133 million worth in 2009 ) to build share in the very fragmented commercial foodservice equipment industry. The latest deal closed in December when Middleby acquired Canadian baking oven maker Doyon Equipment for $4 million. Doyon had $15 million in sales in 2009.

The company also used cash flow to pay down another $20 million in debt during the fourth quarter.

As of March 8, 2010 I’m leaving my target price at $65 a share by November 2010.

Full disclosure: I own shares of Middleby in my personal portfolio.

17 Comments

  1. EdMcGon
    EdMcGon on March 9, 2010 at 7:54 am

    I must admit, I’ve been pleasantly surprised at AOD’s rise lately. I would’ve been happy if it did nothing and just paid me a dividend. Nothing like having my cake and eating it too…

  2. amtrend10
    amtrend10 on March 9, 2010 at 7:43 am

    In terms she can surely understand.

  3. mjbrpw
    mjbrpw on March 9, 2010 at 4:48 am

    EDD – nice dividend – high expenses

  4. Seaturtlelady
    Seaturtlelady on March 8, 2010 at 5:41 pm

    We may have p-aid premium for AOD but you’re right about the “good” dividiend PLUS AOD is making some money on the side too! 🙂

  5. EdMcGon
    EdMcGon on March 8, 2010 at 4:14 pm

    STL,
    With AOD, we’re paying the premium for the good dividend. As the old saying goes, you get what you pay for!

  6. Seaturtlelady
    Seaturtlelady on March 8, 2010 at 4:05 pm

    Run26.2 and EdMcGon…

    Thanks a bunch for the clear-cut explanation! Now, I understand Friday’s poster about why we were buying AOD when it was a 30% premium to NAV!

  7. EdMcGon
    EdMcGon on March 8, 2010 at 3:54 pm

    STL,
    In the simplest terms, it’s like buying the fund on sale.

  8. Run26.2
    Run26.2 on March 8, 2010 at 3:50 pm

    STL:

    NAV is: The total value of all the securities in the fund divided by the number of shares in the fund is called the net asset value (NAV) per share.

    So for EDD, it means that the value of its holdings are worth more than what it currently trades for. In this case, you can buy it for 11% less than the value of its holdings.

  9. Seaturtlelady
    Seaturtlelady on March 8, 2010 at 3:18 pm

    Could someone please explain this statement to me so I can understand it…thanks! What does it mean -11.44% discount to NAV???

    EDD is currently trading at a – 11.44 % discount to NAV according to Morningstar.

  10. EdMcGon
    EdMcGon on March 8, 2010 at 3:03 pm

    I have to admit, when I looked at EDD, it looked undervalued. If it were a company instead of a fund, I’d call it HUGELY undervalued. As it is, I bought some today.

    Not to mention it has a really great symbol…

    Thanks for the tip EHG!

  11. Mike
    Mike on March 8, 2010 at 2:57 pm

    EDD is currently trading at a – 11.44 % discount to NAV according to Morningstar.

  12. EdMcGon
    EdMcGon on March 8, 2010 at 2:50 pm

    Uh oh…Jim is punning and he can’t get up! 😛

  14. Jim Jubak
    Jim Jubak on March 8, 2010 at 2:33 pm

    EHG, Morningstar publishes them but I don’t know whether that’;s part of their free or subscription service. Barron’s publishes them weekly in the print edition. I don’t kinow the situation for Barron’s online.

  15. Jim Jubak
    Jim Jubak on March 8, 2010 at 2:32 pm

    Ed, if you can’t stand the puns, stay out of the kitchen

  16. EHG
    EHG on March 8, 2010 at 2:18 pm

    In a post on Friday Calebdog wrote

    “Morgan Stanley Emerging Markets Domestic Debt (EDD) is another closed-end fund worth considering. Those currencies should do well in coming years. The discount is now 11%, the yield 8%.”

    A question for anyone: where can I find the discount (ie 11%) or premium to NAV of a fund at any given time?

    Thanks

  17. EdMcGon
    EdMcGon on March 8, 2010 at 2:09 pm

    Moved…off…the…back…burner? That was cringe-worthy Jim. 😛

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