Image: Middleby.

The restaurant industry has changed dramatically in recent years, but the one thing that hasn't changed is that restaurant chains need state-of-the-art equipment in order to get the job done. Middleby (NASDAQ:MIDD) makes it its mission to deliver that equipment to a wide variety of clients that range from fast-food giant McDonald's (NYSE:MCD) to smaller mom-and-pop locations. Coming into Tuesday's third-quarter financial report, Middleby investors had hoped that the company would be able to bounce back from somewhat disappointing results last quarter and reignite the growth that Middleby has enjoyed for years. Middleby's results, however, showed that the company continues to work through the major changes it has made internally, with restructuring efforts and the ongoing integration of large acquisitions taking time to complete. Let's look more closely at Middleby to see how it performed and what's ahead for the food-service giant.

Middleby bakes up mixed results
Middleby's third-quarter results didn't give investors everything they were looking for. Revenue climbed more than 11% to $449 million, which was slightly higher than the $446.5 million consensus forecast among investors. On the bottom line, though, net income fell 18% to $48.8 million, and even after taking into account the impact of unfavorable foreign exchange rates and other extraordinary costs, adjusted earnings of $1.04 per share fell $0.02 short of what investors had expected to see from Middleby.

As we've seen in past quarters, organic sales were weak, falling by 0.4% as acquisitions made up all of Middleby's sales growth for the quarter. Currency impacts cost the company about three percentage points of revenue growth, which is consistent with what Middleby has seen in recent quarters as well.

Middleby now has three major segments, and they once again showed much different performance. Net sales for the Commercial Foodservice Equipment Group rose nearly 11%, and even after including acquisitions, organic growth of 6.5% was respectable. By contrast, the Food Processing Equipment Group suffered a 1.3% decline in sales even including the acquisition of Thurne, and organic sales dropped nearly 9%. The Residential Kitchen Equipment Group saw sales jump 27%, but acquisitions of U-Line and AGA Rangemaster produced all of that growth, with organic revenue falling 18% year-over-year.

CEO Selim Bassoul pointed to areas of strength. "We continued to increase our business with chain restaurant customers adopting our new and innovative technologies," Bassoul said, "as they seek to improve the efficiency of their restaurant operations." The CEO was also pleased with how well Middleby did in sustaining profitability even as it integrated several new acquisitions into the fold.

Can Middleby get itself cooking again?
Middleby nevertheless still has several challenges. The Food Processing Equipment segment has seen improving order rates that could reverse recent sales declines and leave it in a better position to thrive in 2016, especially if the company can keep boosting the division's margins. For Residential Kitchen Equipment, the new lineup of Viking refrigeration products required some adjustments internally and among Middleby's dealer partners, but Bassoul said that Viking's products are getting good reviews among customers and could drive substantial growth.

Obviously, the recent acquisition of AGA Rangemaster will also make a huge difference in the residential kitchen industry. The purchase will give Middleby a lot more visibility among shoppers of home appliances, and the company will have to work hard to figure out where it can realize cost savings through synergies and where it can take advantage of the value of the AGA brand to create not only continued success for existing Rangemaster products but also new opportunities for Middleby to cross-sell from its other businesses.

Still, Middleby shouldn't ignore its key commercial market. McDonald's has worked hard recently to adjust its menu to meet customer demand, and those changes will require Middleby to ensure that its products continue to meet McDonald's needs. The more that Middleby can remain in touch with the industry dynamics that McDonald's and its rivals face, the better the equipment-maker will be at anticipating demand for new solutions and giving its customers what they want.

Middleby stock fell sharply following the announcement, but in the long run, the company's major strategic moves will have a big impact on its future success. If it can execute well in integrating new purchases, then Middleby has plenty of room for growth in the years to come.