Arcos Dorados (NYSE:ARCO) Reports Q4 In Line With Expectations
Fast-food chain Arcos Dorados (NYSE:ARCO) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 15.4% year on year to $1.18 billion. Its GAAP profit of $0.26 per share was flat year on year.
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Arcos Dorados (ARCO) Q4 FY2023 Highlights:
Revenue: $1.18 billion vs analyst estimates of $1.17 billion (small beat)
EPS: $0.26 vs analyst estimates of $0.25 (2.2% beat)
Gross Margin (GAAP): 14.1%, down from 14.9% in the same quarter last year
Same-Store Sales were up 32.4% year on year
Store Locations: 2,361 at quarter end, increasing by 49 over the last 12 months
Market Capitalization: $2.52 billion
Translating to “Golden Arches” in Spanish, Arcos Dorados (NYSE:ARCO) is the master franchisee of the McDonald's brand in Latin America and the Caribbean, responsible for its operations and growth in over 20 countries.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Arcos Dorados is one of the larger restaurant chains in the industry and benefits from a strong brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 10% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Arcos Dorados's year-on-year revenue growth clocked in at 15.4%, and its $1.18 billion in revenue was in line with Wall Street's estimates.
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Same-Store Sales
Same-store sales growth is a key performance indicator used to measure organic growth and demand for restaurants.
Arcos Dorados has been one of the most successful restaurants over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 35.8%. This performance suggests its steady rollout of new restaurants is beneficial for shareholders. When a chain has strong demand, more locations should help it reach more customers seeking its meals.
In the latest quarter, Arcos Dorados's same-store sales rose 32.4% year on year. This growth was in line with the 35.7% year-on-year increase it posted 12 months ago.
Key Takeaways from Arcos Dorados's Q4 Results
It was encouraging to see Arcos Dorados narrowly top analysts' revenue and EPS expectations this quarter. On the other hand, its gross margin missed analysts' expectations. Overall, this was a mixed quarter for Arcos Dorados. The stock is flat after reporting and currently trades at $12.03 per share.
So should you invest in Arcos Dorados right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
