Arcos Dorados (NYSE:ARCO) Shares Gap Up Following Strong Earnings

Key Points

• Shares of Arcos Dorados rose significantly, opening at $7.47 after closing at $6.95, following a quarterly earnings report that exceeded estimates with $0.11 earnings per share.
• The company reported a net margin of 3.00% and a return on equity of 26.70%, with a 2.8% revenue increase compared to the same quarter last year.
• JPMorgan Chase downgraded Arcos Dorados from "overweight" to "neutral" and revised its price target down from $10.50 to $8.80.

Arcos Dorados Holdings Inc. (NYSE:ARCO - Get Free Report)'s share price gapped up before the market opened on Wednesday following a stronger than expected earnings report. The stock had previously closed at $6.95, but opened at $7.47. Arcos Dorados shares last traded at $7.52, with a volume of 1,249,707 shares trading hands.

The restaurant operator reported $0.11 earnings per share for the quarter, beating the consensus estimate of $0.05 by $0.06. Arcos Dorados had a return on equity of 24.54% and a net margin of 2.89%. The company had revenue of $1.14 billion during the quarter, compared to the consensus estimate of $1.22 billion. During the same period last year, the firm earned $0.13 earnings per share. The company's revenue was up 2.8% on a year-over-year basis.

Arcos Dorados Cuts Dividend

The business also recently declared a dividend, which was paid on Friday, June 27th. Investors of record on Wednesday, June 25th were paid a $0.06 dividend. This represents a dividend yield of 313.0%. The ex-dividend date was Tuesday, June 24th. Arcos Dorados's payout ratio is 38.10%.

Wall Street Analysts Forecast Growth

Separately, JPMorgan Chase & Co. downgraded shares of Arcos Dorados from an "overweight" rating to a "neutral" rating and reduced their price objective for the company from $10.50 to $8.80 in a research note on Wednesday, July 2nd.

Hedge Funds Weigh In On Arcos Dorados

A number of hedge funds have recently bought and sold shares of the company. Deltec Asset Management LLC raised its stake in Arcos Dorados by 1.2% during the first quarter. Deltec Asset Management LLC now owns 168,538 shares of the restaurant operator's stock valued at $1,358,000 after buying an additional 2,000 shares in the last quarter. O Keefe Stevens Advisory Inc. increased its holdings in shares of Arcos Dorados by 0.4% in the 1st quarter. O Keefe Stevens Advisory Inc. now owns 506,247 shares of the restaurant operator's stock valued at $4,080,000 after acquiring an additional 2,058 shares during the last quarter. Diligent Investors LLC raised its position in shares of Arcos Dorados by 3.3% during the 4th quarter. Diligent Investors LLC now owns 72,478 shares of the restaurant operator's stock valued at $528,000 after acquiring an additional 2,317 shares in the last quarter. Freedom Investment Management Inc. raised its position in shares of Arcos Dorados by 10.6% during the 4th quarter. Freedom Investment Management Inc. now owns 35,689 shares of the restaurant operator's stock valued at $260,000 after acquiring an additional 3,427 shares in the last quarter. Finally, Dodge & Cox lifted its stake in Arcos Dorados by 3.7% during the second quarter. Dodge & Cox now owns 109,966 shares of the restaurant operator's stock worth $868,000 after purchasing an additional 3,966 shares during the last quarter. 55.91% of the stock is currently owned by institutional investors and hedge funds.

Arcos Dorados Trading Down 1.9%

The company has a debt-to-equity ratio of 1.62, a current ratio of 0.80 and a quick ratio of 0.81. The business's fifty day simple moving average is $7.38 and its 200 day simple moving average is $7.63. The stock has a market cap of $1.55 billion, a price-to-earnings ratio of 11.70, a P/E/G ratio of 1.44 and a beta of 0.59.

About Arcos Dorados

Arcos Dorados Holdings Inc operates as a franchisee of McDonald's restaurants. It has the exclusive right to own, operate, and grant franchises of McDonald's restaurants in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curacao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S.