Please ensure Javascript is enabled for purposes of website accessibility

Why Arcos Dorados Holdings Inc Stock Skyrocketed Last Month

By Jeremy Bowman - Apr 5, 2017 at 4:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The McDonald's franchisee popped after a strong earnings report and improving investor confidence.

What happened

Shares of Arcos Dorados Holdings Inc (ARCO 1.32%) climbed last month after the McDonald's franchisee posted a strong earnings report and got a boost after pricing a debt offering.

A McDonald's restaurant at sunset

Image source: Motley Fool.

According to S&P Global Intelligence, the stock finished up 29.8%.

ARCO Chart

ARCO data by YCharts

So what 

McDonald's Latin American franchisee beat estimates on the bottom line in the final quarter of last year, as the business continued to return to health. Earnings per share increased from $0.03 to $0.10, ahead of expectations at $0.06, and revenue increased 5.5% to $807.2 million. That growth was up 14.2% in constant currency, or 8.8% excluding Venezuela.

CEO Sergio Alonso said the company "ended the year strongly with a 240 basis-point increase in Adjusted EBITDA margin." He noted efforts to streamline cost structure and reduce debt levels to improve the company's balance sheet.

Towards the end of the month, the company priced $265 million in debt at a 5.875% rate, lower than the interest rate on debt it just retired.

Now what  

Shares of Arcos Dorados have been on an upswing since last February as Sergio Alonso's transformation plan seems to be taking hold. The company refranchised restaurants with a goal of raising $250 million in capital to pay down debt and shore up its balance sheet. Meanwhile, the Brazilian economy may finally be turning around, which should further boost the stock.

Shares still have a long way to go to get back to their IPO range around $25. That's good news for shareholders as the Arcos' financial picture continues to improve.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Arcos Dorados Holdings Inc. Stock Quote
Arcos Dorados Holdings Inc.
ARCO
$6.91 (1.32%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.