| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3289 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
MIDD Middleby provides a window into restaurant spending and checkbooks are opening up (153.54 +7.13) Middleby (MIDD +5%) is not a name we normally profile. However, it's a huge player in the commercial foodservice equipment space, having recorded $2.5 bln in 2020 sales. As such, we like to check in on it from time to time to get a sense of how the restaurant industry is faring generally. Its Q4 earnings report this morning was very encouraging and bodes well for 2021. Middleby reported a solid EPS beat, and while its revenue declined yr/yr, trends overall point to a gradual comeback for the restaurant industry. Revenue fell 7.4% yr/yr in Q4, but that was a noticeable improvement from -12.4% in Q3 and -38% in Q2. In Commercial Foodservice, orders have consistently improved since the pandemic started. What's notable is that restaurants have been getting more proficient with delivery, carry out, drive-through, and curbside pickup service. Many chain restaurants that had fluid processes in place pre-pandemic have explored ways to shorten wait times and reduce labor needs. Consumer demand has proven resilient, and that has spurred restaurants to spend. MIDD is also benefiting from indoor dining consistently opening up across the country. There is pent-up demand for indoor dining, and this is benefiting MIDD's casual dining customers and leading them to open their checkbooks. MIDD primarily focuses on the commercial side, but it also has a sizable residential segment. Its residential business has helped to offset declines on the commercial side. MIDD has been benefiting from favorable conditions in the housing market, which has seen an increase in remodels and kitchen upgrades due to more time spent in the home. MIDD's smaller Food Processing segment also performed well. MIDD has been looking to increase its presence in fast-growing segments, such as cured meats and alternative protein. Bottom line, it looks like restaurants are spending again. After going into survival mode in Q2 and early Q3, restaurants are starting to invest again to speed up drive-thru and curbside service and to prepare for what likely will be huge pent-up demand once vaccines get rolled out on a wide scale. Also, MIDD's residential business has been robust thanks to the housing boom and remodels. These contributions showcase why it's important for companies to diversify across different customer verticals. While Middleby is not a name widely followed by most retail investors, it's worth a look as a way to play an improving restaurant landscape in 2021. Rather than hitting or missing on a particular restaurant chain, Middleby works as a vehicle to get exposure to the restaurant turnaround generally. Also, MIDD will be lapping some very easy comps in Q2-Q3, so it could be posting some big growth numbers soon. |