What happened 

Shares of Arcos Dorados Holdings Inc. (NYSE:ARCO) jumped again last month, gaining on a strong earnings report for its franchisor and on anticipation of its own second-quarter earnings report.

A McDonald's location in Curacao

Image source: McDonald's.

According to data from S&P Global Market Intelligence, the stock finished July up 18%. The chart below shows the stock's steady gains over the course of the month. 

ARCO Chart

ARCO data by YCharts.

So what 

There was little news out last month, but Arcos stock seemed to gain on momentum from earlier in the year as it had soared 38% through the first six months of the year on two strong earnings reports.

In July, shares popped as McDonald's (NYSE:MCD) delivered its own blowout earnings report, featuring its strongest comparable sales growth in years, with global growth at 6.6%. Arcos Dorados is the biggest McDonald's franchisee in the world with about 2,000 locations in Latin America. McDonald's does not break out performance by region, but said customer traffic was positive in all regions. The new figures to bode well for Arcos Dorados, whose shares have come roaring back after the company has improved its balance sheet after selling off stores and begun posting profits. McDonald's overall strength indicates Arcos should continue to gain. Arcos stock rose 4.5% on the McDonald's report, but gave up those gains the following day.

Now what 

The McDonald's franchisee delivered its own second-quarter earnings report this morning, sending the stock down about 2% as of writing. Revenue increased 16.2% to $798.7 million, and the company posted a loss of $0.02 on the bottom line, down from $0.21 a year ago. Analyst estimates were not available for comparison.

Still, there were positive signs like an increase in customer traffic and expanding EBITDA margins. CEO Sergio Alonso said, "Consistent with our long-term strategic vision, we are focusing on our topline drivers as we transition into our growth strategy." Despite the disappointing bottom-line performance, Arcos Dorados should continue to outperform as long as McDonald's remains strong.

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