Arcos Dorados Holdings Inc. (ARCO) delivered a strong third-quarter performance, exceeding both earnings and revenue estimates, yet its stock took a dip on Wednesday. Despite the positive results, investors seemed hesitant.
The company reported earnings per share of 17 cents, beating the consensus estimate of 16 cents. Quarterly revenues reached $1.133 billion, surpassing the analyst expectation of $1.120 billion.
Arcos Dorados’ success was driven by impressive systemwide comparable sales growth, up 32.1%. This growth was fueled by both increased average check amounts and higher guest volume, demonstrating strong customer demand for the company’s products.
The company’s digital channels, including its Mobile App, Delivery, and Self-order Kiosks, showed significant strength, experiencing a 16% rise in sales compared to the previous year. These digital channels now account for a substantial 58% of total systemwide sales, showcasing the growing importance of online ordering and convenience for customers.
Arcos Dorados’ Loyalty Program, currently active in three markets, continues to gain momentum, reaching 12.9 million registered members. This program is a key driver of customer retention and repeat business.
Consolidated adjusted EBITDA for the quarter reached $125.0 million, reflecting an 11.0% margin. This healthy EBITDA margin indicates the company’s strong profitability and ability to manage costs effectively.
The company’s net debt to adjusted EBITDA leverage ratio remained steady at 1.2x at the end of the third quarter, indicating a solid financial position.
Arcos Dorados continued its restaurant expansion strategy, opening 19 new Experience of the Future (EOTF) restaurants during the quarter. Notably, 11 of these new restaurants were located in Brazil, a key market for the company. The company’s restaurant development plan is on track, with the company expecting to open a total of 80 to 90 new restaurants in 2024.
Arcos Dorados exited the quarter with a strong cash position, holding $120.807 million in cash and equivalents.
Despite the impressive Q3 performance, ARCO shares traded lower by 0.48% to $8.36 at last check Wednesday. The reasons behind this dip are not entirely clear, but could be attributed to broader market sentiment or investor expectations for even stronger growth going forward.
