The Middleby Corporation MIDD has failed to impress investors with its recent operational performance due to weakness across its businesses and high debt levels.

Based in Elgin, IL, the company provides cooking, warming, food preparation and packaging equipment to commercial, industrial processing and residential markets.

Let us discuss the factors that continue to take a toll on the firm.

Factors Affecting Middleby

Business Weakness : Lower demand for residential kitchen products due to weakness in the housing market, amid lower existing and new home sales, is affecting the performance of the Residential Kitchen Equipment Group segment. Also, tough market conditions, both domestically and in Europe, remain concerning for the segment. This is reflected in the segment’s results, which declined 3.8% year over year in the third quarter of 2024, following a 6.2% decline in the second quarter.

Also, softness in the restaurant industry, due to declining traffic, is affecting the demand for the company's products within the Commercial Foodservice Equipment Group segment. High wages and recent food cost inflation have pressured restaurant operators, leading to delayed investments and more restaurant closures, which are alarming for the segment as well. The segment’s revenues declined 4.1% and 5.3% year over year in the second and third quarters of 2024, respectively.

MIDD Stock’s Price Performance

Over the past year, the Zacks Rank #4 (Sell) company has gained 3.2% compared with the industry’s 15.4% growth.

High Debt Level : The company’s highly leveraged balance sheet remains a concern. Exiting third-quarter 2024, the metric remained high at $2.36 billion. Also, the stock looks more leveraged than the industry. Its long-term debt/capital ratio is currently 0.40, higher than 0.36 of the industry.

It is worth noting here that Middleby, in October 2021, amended its credit agreement, increasing its size to $4.5 billion from the previous $3.1 billion. The credit facility included a revolving credit facility, term loan and delayed draw-term loan. We believe that such offerings will add to its debt load and increase its financial obligations.

Forex Woes : With MIDD’s operations spread globally, its business is exposed to risks arising from geopolitical issues, adverse movement in foreign currencies and governmental policies. In the third quarter of 2024, forex woes negatively affected the Commercial Foodservice segment’s sales by 0.1%.

Downward Estimate Revisions : In the past 60 days, the Zacks Consensus Estimate for MIDD’s fourth-quarter 2024 earnings has trended down by a penny to $2.51 per share. Also, the consensus estimate for its 2025 earnings decreased by a penny to $9.62 per share.