Why Arcos Dorados' Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Arcos Dorados (NAS: ARCO) , the largest McDonalds (NYS: MCD) franchisee in the world, were serving up some delicious gains today after the company reported second-quarter earnings.

So what: Despite the positive market reaction to Arcos' quarterly results, the company actually missed Wall Street's estimates on both the top and bottom line. Analysts' consensus called for $0.07 in per-share earnings on $918 million in revenue, while the company only managed $904 million in sales and $0.06 in earnings per share.

Even if we don't stack results up to analysts' estimates, they still didn't look terribly good, as revenue rose a mere 1.8%, while earnings fell. However, the company has been dealing with very unfavorable currency movements, which make its dollar-denominated results look weak. Digging beyond that, Arcos delivered 10.4% year-over-year comparable-store sales growth and "organic Adjusted EBITDA" growth of 6.3%.

Now what: Even after today's big pop, Arcos' stock is still down roughly 30% from a year ago, so it's clear that investors' haven't had particularly high expectations for the company of late. As such, the earnings "miss" for the second quarter may still be a relief for investors if they were concerned that the company might report even worse numbers.

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The article Why Arcos Dorados' Shares Popped originally appeared on Fool.com.

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