Middleby (MIDD)

Kitchen product manufacturer Middleby (NYSE:MIDD) fell short of the market’s revenue expectations in Q4 CY2025, with sales falling 14.5% year on year to $866.4 million. Next quarter’s revenue guidance of $774 million underwhelmed, coming in 14% below analysts’ estimates. Its non-GAAP profit of $2.42 per share was 7.2% above analysts’ consensus estimates.

Company Overview

Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE:MIDD) is a food service and equipment manufacturer.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Rational AG (FWB:RAA), Welbilt (NYSE:WBT), and Illinois Tool Works (NYSE:ITW).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Middleby’s sales grew at a decent 8.2% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Middleby’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 3.8% over the last two years.

Middleby also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Middleby’s organic revenue averaged 2.4% year-on-year declines. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Middleby missed Wall Street’s estimates and reported a rather uninspiring 14.5% year-on-year revenue decline, generating $866.4 million of revenue. Company management is currently guiding for a 14.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.8% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Middleby’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 37.4% gross margin over the last five years. That means Middleby only paid its suppliers $62.61 for every $100 in revenue.

This quarter, Middleby’s gross profit margin was 38.8%, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Middleby has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 13%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Middleby’s operating margin decreased by 22.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Middleby generated an operating margin profit margin of 17.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Middleby’s EPS grew at a remarkable 13.2% compounded annual growth rate over the last five years, higher than its 8.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Middleby’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Middleby has repurchased its stock, shrinking its share count by 9.2%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Middleby, its two-year annual EPS declines of 2.3% mark a reversal from its (seemingly) healthy five-year trend. We hope Middleby can return to earnings growth in the future.

In Q4, Middleby reported adjusted EPS of $2.42, down from $2.88 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 7.2%. Over the next 12 months, Wall Street expects Middleby’s full-year EPS of $9.22 to grow 3.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Middleby has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 12.4% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Middleby’s margin expanded by 2.6 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Middleby’s free cash flow clocked in at $165.5 million in Q4, equivalent to a 19.1% margin. The company’s cash profitability regressed as it was 3.2 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Middleby historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.4%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Middleby’s ROIC has unfortunately decreased. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Middleby reported $222.2 million of cash and $2.17 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $797.9 million of EBITDA over the last 12 months, we view Middleby’s 2.4× net-debt-to-EBITDA ratio as safe. We also see its $33.91 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Middleby beat analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $157.50 immediately following the results.

Updated: February 26, 2026 at 7:14 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Middleby, you should also grasp the company’s longer-term business quality and valuation.

Middleby falls short of our quality standards. Although its revenue growth was decent over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s strong free cash flow generation allows it to invest in growth initiatives while maintaining an ample cushion, the downside is its declining operating margin shows the business has become less efficient.

Middleby’s P/E ratio based on the next 12 months is 16.6x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $168.38 on the company (compared to the current share price of $157.50).