Why Arcos Dorados Holding Inc. Stock Popped Today

By Steve Symington Markets Fool.com

What happened

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Shares of Arcos Dorados Holding Inc. (NYSE: ARCO) climbed as much as 10.7% early Wednesday, and then settled to close up 8.1% after the leading McDonald's franchisee announced strong first-quarter 2017 results.

So what

Quarterly revenue climbed 18.7% year over year (17% at constant currency, and 9.2% excluding Venezuela), to $781.5 million. That translated to net income of $40.6 million, or $0.19 per share, up from $16.1 million, or $0.08 per share, in the same year-ago period. Adjusted earnings before interest, taxes, depreciation, and amortization rose 30% year over year, to $62.7 million.

IMAGE SOURCE: ARCOS DORADOS

"We achieved strong revenue growth and EBITDA margin expansion in the first quarter, alongside early progress on key initiatives from our strategic plan," added Arcos Dorados CEO Sergio Alonso. "Our strategy of leveraging McDonald's core assets to expand volumes, reinvesting in our restaurants, and enhancing operational excellence drove improved customer satisfaction together with top-line growth."

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Now what

Alonso also noted that Arcos Dorados most recently improved its capital structure with the late-March completion of its tender offer and issuance of $265 million in 2027 notes, leaving the company positioned to benefit from "improvements in our markets as we transition from a turnaround mindset to a growth strategy."

This was a solid report, as Arcos Dorados continues to rebound from multi-year lows hit in early 2016. If the company can sustain its momentum as headwinds in its key markets abate, I suspect its share price will continue to follow suit.

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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Arcos Dorados. The Motley Fool has a disclosure policy.