Middleby (MIDD)

Kitchen product manufacturer Middleby (NYSE:MIDD) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 4.2% year on year to $982.1 million. The company expects next quarter’s revenue to be around $1.01 billion, close to analysts’ estimates. Its non-GAAP profit of $2.37 per share was 14.5% 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. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Middleby’s sales grew at a decent 8.6% 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.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Middleby’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.2% over the last two years.

We can dig further into the company’s sales dynamics by analyzing its 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 4.1% year-on-year declines. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Middleby reported modest year-on-year revenue growth of 4.2% but beat Wall Street’s estimates by 2.2%. Company management is currently guiding for flat sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 2% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

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 37.2% gross margin over the last five years. That means Middleby only paid its suppliers $62.76 for every $100 in revenue.

Middleby produced a 36.8% gross profit margin in Q3, 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.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

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 12.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Middleby’s operating margin decreased by 21.1 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.

In Q3, Middleby generated an operating margin profit margin of negative 56.4%, down 74.8 percentage points year on year. Since Middleby’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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 8.6% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Middleby’s earnings quality to better understand the drivers of its performance. A five-year view shows that Middleby has repurchased its stock, shrinking its share count by 8.3%. 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, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q3, Middleby reported adjusted EPS of $2.37, up from $2.33 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Middleby’s full-year EPS of $9.68 to shrink by 7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 12.7% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Middleby’s margin dropped by 1.5 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Middleby’s free cash flow clocked in at $156.1 million in Q3, equivalent to a 15.9% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

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 7.8%, 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 $175.1 million of cash and $2.07 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 $829.8 million of EBITDA over the last 12 months, we view Middleby’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $33.05 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’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed. Overall, this print had some key positives. The stock traded up 2.8% to $127 immediately following the results.

Updated: December 4, 2025 at 10:24 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Middleby.

We cheer for all companies making their customers lives easier, but in the case of Middleby, we’ll be cheering from the sidelines. Although its revenue growth was good 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 projected EPS for the next year is lacking.

Middleby’s P/E ratio based on the next 12 months is 13.6x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $153.25 on the company (compared to the current share price of $125.68).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.