Arcos Dorados (NYSE:ARCO) Shares Gap Up After Better-Than-Expected 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 after the company announced better than expected quarterly earnings. 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.

The restaurant operator reported $0.11 earnings per share (EPS) for the quarter, beating analysts' consensus estimates of $0.05 by $0.06. Arcos Dorados had a net margin of 2.89% and a return on equity of 24.54%. The firm had revenue of $1.14 billion during the quarter, compared to analyst estimates of $1.22 billion. During the same quarter in the prior year, the firm posted $0.13 earnings per share. Arcos Dorados's quarterly revenue was up 2.8% on a year-over-year basis.

Arcos Dorados Cuts Dividend

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

Analyst Ratings Changes

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

Institutional Investors Weigh In On Arcos Dorados

A number of institutional investors have recently made changes to their positions in the stock. Itau Unibanco Holding S.A. purchased a new position in shares of Arcos Dorados during the 1st quarter worth approximately $73,000. R Squared Ltd boosted its stake in shares of Arcos Dorados by 60.3% in the 1st quarter. R Squared Ltd now owns 11,800 shares of the restaurant operator's stock valued at $95,000 after buying an additional 4,440 shares during the period. Mraz Amerine & Associates Inc. purchased a new stake in shares of Arcos Dorados during the second quarter worth approximately $120,000. Olympiad Research LP purchased a new stake in shares of Arcos Dorados during the second quarter worth approximately $140,000. Finally, Boothbay Fund Management LLC lifted its stake in Arcos Dorados by 27.0% in the fourth quarter. Boothbay Fund Management LLC now owns 19,761 shares of the restaurant operator's stock worth $144,000 after acquiring an additional 4,201 shares during the last quarter. 55.91% of the stock is currently owned by institutional investors and hedge funds.

Arcos Dorados Stock Down 0.1%

The firm's fifty day simple moving average is $7.38 and its 200 day simple moving average is $7.63. The company has a current ratio of 0.80, a quick ratio of 0.73 and a debt-to-equity ratio of 1.62. The company has a market cap of $1.55 billion, a price-to-earnings ratio of 11.68, a PEG 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.