Kitchen-gear maker Middleby (MIDD ) is really cooking. Shares leaped from 11 in June to 40 on Dec. 9, prompting Richard Rossi of Morgan Joseph to drop his rating from buy to hold. It has since dropped to 36.23. The fundamentals remain good -- earnings still beat estimates -- but Rossi says the runup already reflects the improvement he expects in 2004. Others disagree. And some pros say there's another factor: takeover talk. Chairman William Whitman Jr. has a 40% stake, and rumors say he might sell out to the likes of Swedish appliance king Electrolux. Whitman concedes he gets overtures. At some point, he adds, as the industry consolidates further, a strategic partner could materialize. From sales of $16 million in 1983, Middleby has grown to No. 1 in commercial cooking gear, Whitman notes, with 2002 sales of nearly $300 million. Middleby's brands, such as Southbend and Toastmaster, are used worldwide in fast-food and full-service restaurants. James Clement of investment firm Sidoti figures the stock is worth 50 on fundamentals alone. Middleby CEO Selim Bassoul says more growth will come from overseas, where "we only have 3% of the market," but which accounts for 20% of total sales. Rating Middleby a strong buy, Anton Brenner of Roth Capital Partners says its products help users control their energy and labor costs. He has raised his earnings estimate for 2003 from $1.63 a share to $1.82 , and for 2004 from $1.90 to $2.20, vs. $1.27 in 2002.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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