Middleby (NASDAQ:MIDD) has done a good job of offering a wide array of kitchen equipment both to consumers and to restaurants and other institutional food-services providers. As the variety of restaurants has widened, so too have the needs of Middleby's customers, but the equipment specialist has kept up through strategic acquisitions and organic growth. Coming into Tuesday's fourth-quarter financial report, Middleby investors had high hopes for solid sales gains and double-digit percentage growth in net income. But the company did far better than that, delivering sharp gains in key metrics that satisfied even growth-hungry investors.

Let's take a closer look at Middleby to see how it did and what's ahead for the kitchen equipment company in the future.

Large commercial kitchen oven.

Image source: Middleby.

Middleby finishes 2016 strong

Middleby's fourth-quarter results exceeded most expectations. Revenue climbed 12% to $596.8 million, which was substantially better than the 7% growth rate that most investors were looking to see. Net income soared by three-fifths to $80.9 million, and that produced earnings of $1.41 per share. That compared quite favorably to the consensus forecast for $1.28 per share among those following the stock.

Taking a closer look at the figures, Middleby continued to experience big impacts from recent acquisitions and from foreign currency. Out of the 12 percentage points of growth in its top line, Middleby owed almost 10 points to acquisitions over the past year. At the same time, the strong dollar cost the company four percentage points of sales gains, leaving Middleby with a six-percentage-point growth rate from an organic business standpoint.

As we've seen in past quarters, not all of Middleby's key segments performed the same way. The commercial foodservice division posted a 20% sales increase compared to the year-ago quarter, with 7% organic growth and a positive impact from the acquisition of Follett. The food processing equipment unit did even better, with nearly 20% gains coming exclusively from organic growth. However, the residential kitchen equipment group saw a 6% drop in the fourth quarter, and even that was helped by acquisitions of AGA Rangemaster and Lynx.

Middleby did manage to keep improving its margin figures. Gross margin jumped by nearly three percentage points to 40.1%, and the drop in restructuring expenses helped produce more than seven points of upward support to operating margin, which climbed above the 21% mark.

CEO Selim Bassoul was happy with the company's results. "We were pleased with the progress we made during the year at all three segments in our profit improvement initiatives," Bassoul said. The CEO also pointed to strong international growth in its commercial unit and greater food processing activity in emerging markets.

What's on the back burner at Middleby?

Despite problems at the residential business, Middleby has high hopes for its future prospects. In Bassoul's words, "Longer-term, we expect to realize additional synergies across the residential business segment, which we anticipate will result in increased profitability across the entire segment."

At the same time, the kitchen equipment specialist is still conscious of the need to make up for operational lapses in the past. For instance, the Viking recall hurt Middleby even though the manufacture of those items occurred under previous management. But Middleby is still working hard to restore the brand's reputation while also focusing on the most profitable products offered under its various businesses.

Middleby investors were quite pleased with the way that the company performed during the quarter, and the stock climbed nearly 4% in after-market trading following the announcement. The kitchen-equipment business has further room to grow, and as it does, Middleby will have a golden opportunity to take full advantage by delivering the innovative products that its residential and commercial customers want in their kitchens. 

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