What Happened?

Shares of coffee chain Dutch Bros (NYSE:BROS) jumped 40.3% in the morning session after the company reported a "beat and raise" quarter, which suggests that its recent sales optimization efforts are resonating with customers. Dutch Bros delivered strong third-quarter earnings, which blew past analysts' revenue and EBITDA expectations as same-shop transaction growth improved. This shows profitable growth. The company is engaging customers by introducing new menus, such as seasonal beverages like the Cookie Butter Latte. The rollout of mobile ordering across most locations has also increased transaction frequency.

Lastly, the Dutch Rewards program also contributed to customer retention as the business recorded a high percentage of transactions from members and record-high new memberships.

Given the impressive results, management raised full-year revenue and EBITDA guidance. Zooming out, we think this was a standout quarter.

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What The Market Is Telling Us

Dutch Bros’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for Dutch Bros and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 3 months ago when the stock dropped 25.9% on the news that the company reported weak second-quarter earnings results. Its gross margin missed analysts' expectations, and its full-year revenue guidance slightly missed Wall Street's estimates, the latter seeming to drag shares down. On the other hand, Dutch Bros blew past analysts' EPS expectations. Its revenue also outperformed Wall Street's estimates. Zooming out, we think this was a mixed yet weaker quarter for the company given the soft guidance.

Dutch Bros is up 48.4% since the beginning of the year, and at $46.11 per share, has set a new 52-week high. Investors who bought $1,000 worth of Dutch Bros’s shares at the IPO in September 2021 would now be looking at an investment worth $1,257.

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