ITW - Can Middleby Acquire the Growth it Needs?
Just outside Chicago sits the headquarters of Middleby (NASDAQ: MIDD), a lesser-known manufacturer of food preparation equipment. It's been on an acquisition spree this year, acquiring four businesses since February. But this news isn't so much a game-changer as the game-plan for Middleby. Every year it makes a handful of acquisitions to add to its now nearly 100 brand portfolio.
Organic growth -- growth from existing products and services -- is scarce in the food equipment business. Illinois Tool Works (NYSE: ITW), which might be Middleby's biggest competitor, operates in seven distinct business segments. One segment is food equipment manufacturing like Middleby. In its third quarter, ITW reported 1% organic equipment growth. This is similar to Middleby's second quarter, with organic sales only up 2.3%.
At that pace, organic sales won't make Middleby a market-beating investment. Let's take a look at whether acquisitions turn the company into a market-beater.