By Karen Roman The Middleby Corp. (Nasdaq: MIDD) said net sales increased 5% in the fourth quarter of 2025 compared to the previous year reaching $866 million. Food processing orders grew 66% organically with a year-end backlog up 36%, while adjusted EBITDA was $197 million compared to $226 million, and adjusted EPS was $2.14 or $2.42 if residential kitchen was not classified as discontinued operations, it stated. Fiscal outlook for 2026 expects net sales growth between 1-3% in commercial foodservice a ...

Illinois Tool Works Inc. (NYSE:ITW) is included among the 16 Best Dividend Stocks with Rising Payouts. Barclays Raises Illinois Tool Works (ITW) Price Target, Sees “Some Encouragement” in Outlook On February 9, Barclays analyst Julian Mitchell raised his price target on Illinois Tool Works Inc. (NYSE:ITW) to $275 from $244. The analyst reiterated an Underweight rating on the stock. He said the company’s outlook showed “some encouragement,” pointing to a few positive signs despite the cautious rating. E ...

Core Insights - Illinois Tool Works Inc. (ITW) is set to release its third-quarter 2025 results on October 24, with a consensus estimate for revenues at $4.08 billion, reflecting a 2.9% increase year-over-year, and adjusted earnings expected at $2.69 per share, indicating a 1.5% rise from the previous year [1][2][11] Revenue Segment Analysis - The Food Equipment segment is anticipated to see a revenue increase of 3.7% year-over-year to $701.9 million, driven by growth in institutional, restaurant, and food retail markets in North America, along with strong demand in Europe [3] - The Welding segment is expected to grow by 4.3% year-over-year to $481.8 million, supported by higher demand in the Asia Pacific and Middle East markets [4] - The Specialty Products segment is projected to increase by 2.8% year-over-year to $450.3 million, fueled by strong performance in ground support equipment, consumer packaging, and specialty films [5] - The Automotive OEM segment is forecasted to grow by 4.4% year-over-year to $805.8 million, benefiting from increased auto build rates and strength in the electric vehicle market in China [6] - The Polymers & Fluids segment is expected to see a modest revenue increase of 1% year-over-year to $452.4 million, despite challenges from lower demand in North America and Europe [7] - The Test & Measurement and Electronics segment is projected to grow by 2.3% year-over-year to $712.9 million, aided by demand in the semiconductor market [8] - The Construction Products segment is anticipated to decline by 0.5% year-over-year to $476.5 million due to lower demand in commercial and residential markets [9] Margin and Profitability Insights - ITW's gross margin is expected to increase by 40 basis points to 44.2% in the second quarter, supported by effective cost management and enterprise initiatives [9] - The company's significant international operations may face foreign currency headwinds, potentially impacting profitability [10] Earnings Prediction - ITW has an Earnings ESP of +0.35%, with the most accurate estimate at $2.70 per share, suggesting a likelihood of an earnings beat [12][13]

Core Thesis - The Middleby Corporation (MIDD) is viewed positively due to its potential for growth driven by replacement cycles, strategic spin-offs, and operational improvements, with an intrinsic value estimated at $160, potentially rising to $220 in a bullish scenario [4]. Company Overview - Middleby Corporation is a global leader in food equipment, operating in Commercial Foodservice (CFS), Food Processing (FP), and Residential Kitchen (RK) segments [2]. - The company achieved a 39.7% CAGR from 2001 to 2016 under previous leadership, but growth has slowed since then, with an 11.8% total return over the past 8.5 years [2]. Segment Analysis - The CFS segment includes ovens, fryers, and refrigeration, serving major clients like McDonald's and Burger King, with demand driven by replacement cycles and new builds [3]. - The FP segment, which is set for a spin-off in 2026, focuses on processing for protein and bakery products, while the RK segment targets premium residential products [3]. Management Initiatives - Recent management strategies include revamping go-to-market approaches, aligning sales incentives, and focusing on technology-driven acquisitions [4]. - Long-term projections suggest organic growth of approximately 2-2.5% and EBIT CAGR of around 4.8% through 2035, with an anticipated $7 billion in free cash flow for shareholder returns [4]. Market Valuation - At a share price of $132, the market is perceived to undervalue the company’s upcoming replacement cycles and operational improvements, with a significant upside potential [4].

Group 1 - The article discusses the investment perspective on The Middleby Corporation (NASDAQ: MIDD), emphasizing a hold rating due to a lack of improvements in the CF segment fundamentals [1] - The author advocates for a fundamentals-based approach to value investing, highlighting the importance of long-term durability and robust balance sheets over low multiple stocks [1] - It is noted that while investing in successful companies carries risks, the potential for significant development can make immediate price less critical [1]

Core Viewpoint - Illinois Tool Works Inc. (ITW) is expected to report second-quarter 2025 results on July 30, with earnings estimates showing a positive trend and a history of surpassing consensus estimates [1][14]. Revenue and Earnings Estimates - The consensus estimate for revenues is $4.01 billion, reflecting a 0.4% decrease from the previous year [2]. - Adjusted earnings are estimated at $2.56 per share, indicating a 0.8% increase year over year [2]. Segment Performance Expectations - The Food Equipment segment is anticipated to see a revenue increase of 0.3% year over year to $668.8 million, driven by growth in institutional markets and strong demand in Europe [3]. - The Welding segment's revenues are expected to decline by 0.1% to $465.3 million, impacted by softness in industrial markets despite recovery in Asia Pacific and the Middle East [4]. - The Specialty Products segment is projected to decrease by 0.2% to $448.2 million, affected by weakness in the filter medical business [6]. - The Polymers & Fluids segment is expected to decline by 1.7% to $446.3 million, influenced by softness in body and tire repair businesses [6]. - The Automotive OEM segment is forecasted to decrease by 2.3% to $795.8 million due to a lower North American auto build rate [7]. - The Test & Measurement and Electronics segment is expected to see a revenue drop of 1.1% to $670.4 million, impacted by declining demand in the semiconductor market [8]. - The Construction Products segment is projected to decrease by 0.3% to $502.4 million, affected by lower demand in commercial and residential markets [10]. Margin and Cost Management - ITW's gross margin is expected to increase by 70 basis points to 44.5% due to effective cost management and enterprise initiatives [7][9]. Earnings Prediction - ITW has an Earnings ESP of +1.19%, suggesting a potential earnings beat, with the most accurate estimate at $2.59 per share [12].

Financial Performance - Middleby's Q1 2025 net sales decreased by 2.2% to $906.6 million, compared to $926.9 million in Q1 2024[8] - Adjusted EBITDA for Q1 2025 was $182.1 million, a decrease of 2.0% compared to $185.8 million in Q1 2024[8] - Operating cash flow remained relatively stable at $141.1 million in Q1 2025, compared to $140.9 million in Q1 2024[8] - Middleby repurchased $29 million of common stock in Q1 2025 and an additional $21 million to date in Q2 2025[25] Segment Performance - Commercial Foodservice net sales decreased by 3.2% to $562.7 million in Q1 2025[13] - Residential Kitchen net sales increased by 1.2% to $176.0 million in Q1 2025[16] - Food Processing net sales decreased by 2.2% to $167.9 million in Q1 2025[19] Strategic Initiatives - Middleby plans to allocate the vast majority of free cash flow to share repurchases, aiming to reduce outstanding shares by 6–8% annually[2] - The company is targeting a leverage ratio of 2.0–2.5x[2] - Middleby is progressing with the Food Processing spin-off, targeted for completion by early 2026[4] - Preliminary tariff cost effect is projected to be $150–200 million annually, with China representing roughly 50% of the identified cost exposure[3] Regional Performance - In Commercial Foodservice, U S and Canada revenue was $413.9 million, a decrease of 2.8%[14] - In Residential Kitchen, U S and Canada revenue was $112.9 million, an increase of 5.5%[17] - In Food Processing, U S and Canada revenue was $93.2 million, a decrease of 10.2%[20]

Financial Data and Key Metrics Changes - The company reported revenues for 2024 at approximately $3.9 billion, a modest decline compared to the previous year. Adjusted EBITDA was $866 million with a margin of 22.4%, slightly ahead of last year [19] - In Q4, revenues exceeded $1 billion, with adjusted EBITDA of over $251 million, marking a record margin of 24.8%. GAAP earnings per share were $2.07, while adjusted EPS was $2.88 [20] - Free cash flow reached $229 million in Q4, contributing to a total of over $640 million for the year, with a free cash flow conversion rate of 140% [18][23] Business Line Data and Key Metrics Changes - The Food Processing segment achieved 4.7% organic revenue growth in Q4, resulting in revenues of over $219 million and an adjusted EBITDA margin of 29.6%, up 200 basis points year-over-year [20] - Residential revenues in Q4 were $185 million, down 2.4% year-over-year, but marked the slowest decline of the year. The adjusted EBITDA margin was 13%, the highest in 1.5 years [21] - Commercial revenues in Q4 were over $609 million, with organic revenues down 2.8% year-over-year, maintaining healthy margins over 28% [22] Market Data and Key Metrics Changes - The company noted that macro conditions remained challenging for both commercial and residential businesses but showed signs of gradual improvement moving forward [14] - The Food Processing business finished the year exceptionally strong, with expectations for continued growth into 2025 driven by favorable long-term market drivers [15] Company Strategy and Development Direction - The company announced plans to separate its Food Processing business into a stand-alone public company, aiming to create two independent industry leaders and enhance strategic focus [5][6] - The remaining Middleby Corporation will focus on commercial and residential kitchen equipment, with an emphasis on innovation and capturing market opportunities in automation and digital technologies [9][10] - The company plans to execute the separation through a tax-free spinoff expected to be completed by early 2026 [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the residential business, anticipating gradual improvement in the coming years due to strategic investments made during the downturn [49][50] - The company expects organic revenue growth in the low single digits for 2025, with profitability growth rates exceeding organic revenue growth [30] - Management highlighted the importance of M&A opportunities for both the Food Processing and remaining businesses, with a balanced approach to capital allocation [63] Other Important Information - The company added two new Board members, enhancing the Board's capabilities and perspectives as part of a refreshment process [11][12] - The company is focused on increasing the mix of parts and services across its business segments, leveraging IoT and data to enhance customer experience [124] Q&A Session Summary Question: Can you walk us through the decision to separate Food Processing? - Management indicated that the decision was based on a long-term strategic review, believing that separation will accelerate growth for both entities [42][44] Question: What are the expected free cash flow conversions for the separate businesses? - Management suggested that both businesses could achieve 100% or greater free cash flow conversion, given their similar cash flow characteristics [46] Question: How does the company view the recovery in the residential business? - Management noted that the residential business is at a cyclical trough but sees significant opportunities for growth and margin expansion in the coming years [50][72] Question: What is the outlook for organic growth in Commercial Foodservice? - Management expects a slow start to the year but anticipates improving conditions throughout 2025, with new store openings and increased consultant activity driving growth [80][86] Question: What is the leverage profile expected post-spin? - Management indicated that the Food Processing business would likely have less leverage, allowing for more focus on M&A opportunities [95]