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Why Dutch Bros Stock Was Surging Today

Motley Fool - Wed Aug 9, 10:47AM CDT

What happened

Shares of Dutch Bros (NYSE: BROS) were up 22% as of 10:54 a.m. ET on Wednesday after the company's second-quarter earnings results. While revenue missed estimates, adjusted earnings per share of $0.13 significantly beat the consensus estimate calling for $0.07.

So what

The market wasn't pleased with the company's first-quarter results, especially with the $9.4 million loss on the bottom line and a decline in same-shop sales. But Dutch Bros proved it can control costs in this challenging operating environment and deliver profitable growth while continuing to invest in opening new shops.

Overall, revenue grew 34% year over year, up from 30% in the previous quarter. The company opened 38 new shops, bringing its total footprint to 754, a 25% year-over-year expansion. The company padded that increase in new shops by also reporting a 3.8% increase in same-shop sales. The market was more impressed with the $9.7 million in net profit, a big improvement over the year-ago quarter's loss of $1.8 million.

Now what

Dutch Bros is demonstrating outstanding margin performance. The contribution margin for company-operated shops was 30%, a significant increase over the year-ago quarter's 25% margin and even higher than Chipotle Mexican Grill's restaurant-level margin, which points to a bright future as it expands across the U.S.

The company is executing well where it counts. As it continues to expand its shop footprint and deliver profitable growth for investors, this could be a high-growth restaurant stock that joins ranks with the top chains in the industry in the next decade.

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John Ballard has positions in Dutch Bros. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

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