Middleby (Nasdaq: MIDD ) shares got hotter than ever after the oven manufacturer reported its fourth-quarter results. Is it destined to cool down after such a successful run?
Fourth-quarter net income jumped 52.9% to $11.1 million, or $1.34 per share. Sales increased 27.8% to $98.3 million. (Here's the full rundown of Middleby's fourth-quarter financial results.)
Anybody who follows Middleby knows that the stock skyrocketed to a new 52-week high last Friday after reporting its latest numbers. (Tom Gardner, who recommended Middleby to Motley Fool Hidden Gems subscribers, commented on Middleby's outlook as well.) Of course, investors are more concerned about its future, a topic on which the company's conference call shed considerable light.
Middleby has focused on the commercial oven market, competing with rivals like TurboChef (Nasdaq: OVEN ) and offering its wares to companies like Papa John's (Nasdaq: PZZA ) . Tom pointed out in his comments that the massive consumer trend to eat out shows no signs of abating, and it's steadily spreading worldwide. Middleby has not only made acquisitions to further its hold on this market, but also says it's got innovative new ovens in the pipeline that provide high-speed cooking, automation, and energy savings.
The company's conference call discussed in greater detail its pending purchase of Jade Products from Whirlpool's (NYSE: WHR ) Maytag unit, set to close April 2. Jade has recently incurred losses of more than $3 million per year, but Middleby aims to improve its profitability. Until it can do so, the company says acquiring Jade will likely hurt its earnings to some degree in the second and third quarters; Middleby doesn't know how big the hit will be, but it believes other factors may help soften the blow.
It's perhaps most interesting, that while Jade provides commercial ovens, it will also allow Middleby to enter the residential oven market, which makes up about 15% of Jade's revenues.
Although Middleby Chairman and CEO Selim Bassoul said his company's not trying to be the largest player in residential ovens, he did describe the positives of trying to appeal to the high end of this market with sleek stainless-steel models. Bassoul said that Middleby would like to emulate its success in the commercial market by setting trends in residential pricing and innovation.
Middleby has a history of acquiring companies and improving their profits, and the Jade acquisition will expose it to an interesting new market segment. Given Middleby's success thus far and its forward-looking plans, the long term still sounds bright.
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Alyce Lomax does not own shares of any of the companies mentioned.
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