While major companies’ quarterly earnings reports showed mixed performance, investors saw a standout performance by Dutch Bros, whose shares skyrocketed on November 7 after an impressive earnings report was released. Headquartered in Oregon, the drive-through coffee chain reported substantial growth, beating Wall Street’s earnings expectations and leaving analysts and investors abuzz.
CEO Christine Barone reflected on recent earnings results, stating, “We are incredibly excited about the strength of our brand, the love from our customers, and our clear path forward.”
Barone’s statement came during the company’s earnings call, during which the figures were shared. These figures included profits rising to 11 cents per share, up from 7 cents at the same time last year, and revenue surged by 28% year-over-year to $338 million, beating forecasts and demonstrating resilient growth.
After solid third-quarter earnings, Dutch Bros saw shares shoot up, recently hitting a 52-week high and reaching nearly 40%. On November 7, the stock gained 38.6% by the late morning, bringing year-to-date returns of more than 50% as it hit its highest level in over two years.
Strategy Plans to Expand
Dutch Bros credits improving sales volumes to their recent promotions, such as one linked to National Coffee Day, which helps drive foot traffic and brighten customers’ days.
“We believe innovation plays a foundational role in Dutch Bros’ growth story,” Barone stated, emphasizing the importance of innovation within the company’s strategy.
In 2024, the company saw $184 million in cash from operations earnings versus the $179 million spent on capital expenditures. Despite being in hypergrowth mode, Dutch Bros generated positive FCF, which is vital to shareholders. It suggests the company is on the brink of self-funding its store count expansion plans without thinning out shareholders via new share offerings.
Barone has credited the company’s focus on its real estate strategy for much of its success this year. In the third quarter, revenue soared 28% year over year, with same-store sales growing 2.7%, exceeding Dutch Bros’ predictions.
According to Barone, the company’s “refined real estate strategy” has contributed to the boost in productivity from an improved site selection process and a focus on developing new shops. On a conference call for investors, the CEO stated, “Enhanced market planning and our elevated paid ad spending in new markets is driving improved new shop productivity.”
Dutch Bros added 38 new shops over three months. The company expects 150 new store openings this year and will expand its reach in 2025.
Barone stated the company’s use of a growing amount of data to model new store openings.
Should You Invest Now?
Shares of this fast-growing company certainly aren’t cheap. With a forward price-to-earnings (P/E) ratio of roughly 120, its growth strategy has no room for error. Thus, an investing strategy of buying in thirds by adding during dips may make more sense after shares have skyrocketed recently.
But before you buy stock in Dutch Bros, consider information from the Motley Fool Stock Advisor analyst team.
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