Why Arcos Dorados Was a Golden Stock This Week

What happened

Arcos Dorados (NYSE: ARCO) shareholders were a happy bunch this week. After all, their stock enjoyed a nearly 9% rise across the Monday-to-Friday trading stretch, according to data provided by S&P Global Market Intelligence. But that’s what a convincing earnings beat will do, and the company certainly scored on that measure.

So what

On Wednesday morning, before market open, Arcos Dorados released its first-quarter results. These revealed that the mega-franchiser of McDonald’s (NYSE: MCD) restaurants in Latin America earned total revenue of almost $791 million. That was a triple-patty increase of nearly 41% year over year.

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On the bottom line, Arcos Dorados flipped rather dramatically to a net profit of $24.5 million ($0.12 per share) against the $29.7 million loss in the same quarter last year.

Both headline numbers absolutely crushed analyst estimates. Collectively, the prognosticators following the stock were modeling a shade under $720 million on the top line and a mere $0.04 per share for net earnings.

Although Arcos Dorados’ strong quarter was due partially to restaurant openings (16 in total), it attributed the over-performance to its “Three-D” business strategy. This stands for digital, delivery, and drive-thru, three attributes that have similarly driven McDonald’s fundamentals higher. Arcos Dorados said that all told, digital sales comprised nearly 40% of the quarter’s revenue.

Now what

Arcos Dorados — which, by the way, means “Golden Arches” in Spanish — didn’t proffer guidance for either the current quarter or the full year. That didn’t seem to worry investors, who have obviously drawn positive conclusions on their own about the company’s prospects.

As for analysts, they are also bullish on Arcos Dorados. On average, according to data compiled by Yahoo! Finance, they are expecting per-share earnings to rise by 54% in 2022 over the previous year to $0.37, on the back of a 15% rise in revenue to $3.04 billion.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Arcos Dorados. The Motley Fool has a disclosure policy.

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