Arcos Dorados (ARCO)
NYSE:ARCO
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Arcos Dorados Holdings
(NYSE:ARCO)
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Rating:68Neutral
Price Target:
$9.50
â–˛(6.03% Upside)
Action:Reiterated
Date:05/24/26
The score is driven by improving operating performance and a favorable earnings call outlook (margin expansion and cash flow turnaround). Offsetting these positives are elevated leverage and only moderate free-cash-flow conversion. Technicals are mildly supportive and valuation is reasonable with a ~3% yield.
Positive Factors
Digital & Loyalty Momentum
Rapid digital adoption and a large, growing loyalty base materially strengthen recurring demand and customer frequency. Digital sales (ordering, delivery, kiosks) lower per-transaction costs and enable targeted promotions, improving long-term revenue per customer and margin resiliency across markets.
Negative Factors
Elevated Leverage
Significant leverage constrains financial flexibility and heightens sensitivity to interest rates, currency swings and downturns in Latin American demand. While improving, 2.8x debt-to-equity limits room for aggressive buybacks or capex spikes and raises refinancing and covenant risk over the medium term.
Read all positive and negative factors
Positive Factors
Negative Factors
Digital & Loyalty Momentum
Rapid digital adoption and a large, growing loyalty base materially strengthen recurring demand and customer frequency. Digital sales (ordering, delivery, kiosks) lower per-transaction costs and enable targeted promotions, improving long-term revenue per customer and margin resiliency across markets.
Read all positive factors
Arcos Dorados Holdings (ARCO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.84B
Dividend Yield3.27%
Average Volume (3M)1.30M
Price to Earnings (P/E)12.0
Beta (1Y)0.48
Revenue Growth7.89%
EPS Growth74.64%
CountryUS
Employees100,000
SectorConsumer Cyclical
Sector Strength84
IndustryRestaurants
Share Statistics
EPS (TTM)1.11
Shares Outstanding130,663,060
10 Day Avg. Volume1,461,707
30 Day Avg. Volume1,303,950
Financial Highlights & Ratios
PEG Ratio0.17
Price to Book (P/B)2.01
Price to Sales (P/S)0.33
P/FCF Ratio103.13
Enterprise Value/Market Cap2.05
Enterprise Value/Revenue0.78
Enterprise Value/Gross Profit6.42
Enterprise Value/Ebitda6.36
Forecast
1Y Price Target
$10.89Price Target Upside21.51% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
EPS Forecast (FY)0.7
Revenue Forecast (FY)$5.24B
Arcos Dorados Holdings Business Overview & Revenue Model
Company Description
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's restaurants. The company has the exclusive right to own, operate, and grant franchises of McDonald's restaurants in 20 countries and territories in Latin America and the Caribbean,...
How the Company Makes Money
Arcos Dorados primarily makes money by operating McDonald’s restaurants and selling food and beverages directly to customers. Revenue is generated at the point of sale across channels such as counter service, drive-thru, takeaway, delivery, and di...
Arcos Dorados Holdings Earnings Call Summary
Earnings Call Date:May 20, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Aug 19, 2026
Earnings Call Sentiment Positive
The call highlighted multiple strong operational and financial improvements: double-digit revenue growth (~13%), a 16% rise in systemwide comparable sales, the highest first-quarter adjusted EBITDA (~$118–$119M) with 120 bps of consolidated margin expansion, and a material turnaround to ~ $110M adjusted free cash flow over the trailing 12 months. Digital and loyalty initiatives showed clear traction (digital +21%, loyalty members +62% to ~30M). Offsetting these positives were short-term volume pressure in Brazil (industry volumes down mid- to high-single digits), margin softness in NOLAD excluding one-time items, and ongoing payroll and occupancy cost pressures. Management emphasized disciplined pricing, mix optimization and continued investment discipline. Overall, the favorable revenue, margin expansion and cash flow turnaround materially outweigh the near-term operational headwinds.Positive Updates
Top-Line Growth and Record Quarterly Revenue
Total revenue grew ~13% year-over-year and surpassed $1.2 billion for the first time in a first quarter, driven by systemwide comparable sales and favorable currency movements.
Negative Updates
Short-Term Volume Pressure in Brazil
Restaurant volume in Brazil slowed meaningfully in the weeks after mid-March with industry volumes down mid- to high-single digits; comp sales in Brazil remained pressured early in the quarter, requiring targeted initiatives to recapture traffic.
Read all updates
Q1-2026 Updates
Positive
Negative
Top-Line Growth and Record Quarterly Revenue
Total revenue grew ~13% year-over-year and surpassed $1.2 billion for the first time in a first quarter, driven by systemwide comparable sales and favorable currency movements.
Read all positive updates
Company Guidance
Management's guidance for 2026 emphasized driving sustainable top‑line growth while improving profitability and generating positive adjusted free cash flow, noting LTM adjusted free cash flow of almost $110 million (vs. a negative $3 million prior period) and Q1 adjusted EBITDA of ~$118 million with consolidated EBITDA margin expansion of 120 basis points (roughly +60 bps from food & paper and +60 bps from G&A); they expect underlying margin improvement through the year, an effective tax rate in line with 2025 and net debt/adjusted EBITDA roughly unchanged. Management said Q2 is off to a strong start (April posted the best monthly growth in ~20 months with positive traffic and solid average‑check growth into mid‑May), reiterated the priority on profitable growth and modernization (Q1 capex $36.8M, including $16.7M for 19 new restaurants—13 freestanding), reaffirmed the ~70/30 operated/sub‑franchise mix, plans to reach ~90% Experience‑of‑the‑Future stores (from ~75% today) and to modernize roughly 10% of the base annually, and expressed cautious optimism on food (notably beef) costs while maintaining disciplined pricing and investment returns.Arcos Dorados Holdings Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
46
Neutral
Cash Flow
59
Neutral
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 4.82B | 4.68B | 4.47B | 4.33B | 3.62B | 2.66B |
| Gross Profit | 588.03M | 574.12M | 586.42M | 597.14M | 492.61M | 324.06M |
| EBITDA | 593.43M | 571.76M | 502.88M | 464.44M | 384.24M | 247.73M |
| Net Income | 234.33M | 212.12M | 148.76M | 181.27M | 140.34M | 45.49M |
Balance Sheet | ||||||
| Total Assets | 3.82B | 3.89B | 2.89B | 3.02B | 2.64B | 2.36B |
| Cash, Cash Equivalents and Short-Term Investments | 266.17M | 422.35M | 138.59M | 246.77M | 304.40M | 278.83M |
| Total Debt | 2.19B | 2.25B | 1.72B | 1.69B | 1.56B | 1.53B |
| Total Liabilities | 3.04B | 3.11B | 2.38B | 2.50B | 2.31B | 2.14B |
| Stockholders Equity | 775.43M | 770.49M | 508.08M | 515.28M | 323.62M | 220.43M |
Cash Flow | ||||||
| Free Cash Flow | 54.76M | 14.99M | -60.79M | 21.87M | 128.32M | 143.04M |
| Operating Cash Flow | 306.60M | 296.34M | 266.85M | 381.96M | 345.44M | 258.04M |
| Investing Cash Flow | -184.07M | -335.03M | -280.33M | -380.35M | -259.65M | -108.28M |
| Financing Cash Flow | -287.88M | 288.75M | -37.16M | -11.82M | -59.98M | -17.93M |
Arcos Dorados Holdings Technical Analysis
Positive
8.96
Price Trends
8.53
Positive
8.29
Positive
7.63
Positive
Market Momentum
<0.01
Negative
51.12
Neutral
81.97
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARCO, the sentiment is Positive. The current price of 8.96 is above the 20-day moving average (MA) of 8.72, above the 50-day MA of 8.53, and above the 200-day MA of 7.63, indicating a bullish trend. The MACD of <0.01 indicates Negative momentum. The RSI at 51.12 is Neutral, neither overbought nor oversold. The STOCH value of 81.97 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ARCO.
Arcos Dorados Holdings Risk Analysis
Arcos Dorados Holdings disclosed 50 risk factors in its most recent earnings report. Arcos Dorados Holdings reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Arcos Dorados Holdings Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $1.84B | 12.02 | 32.65% | 3.27% | 7.89% | 74.64% | |
67 Neutral | $200.55B | 27.85 | -433.95% | 2.31% | 6.76% | 6.96% | |
64 Neutral | $42.76B | 24.92 | -23.33% | 1.84% | 9.65% | 23.32% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
60 Neutral | $1.49B | 7.07 | 150.73% | 8.15% | -1.84% | -17.48% | |
59 Neutral | $10.53B | 22.18 | -15.04% | 1.63% | 5.17% | -0.62% | |
50 Neutral | $1.10B | 36.76 | -6.47% | 4.72% | -2.41% | -64.77% |
* Consumer Cyclical Sector Average
ARCO
Arcos Dorados Holdings
8.75
1.63
22.96%
DPZ
Domino's Pizza
316.52
-155.91
-33.00%
MCD
McDonald's
282.27
-25.19
-8.19%
PZZA
Papa John's International
33.40
-6.88
-17.09%
WEN
Wendy's
7.81
-2.96
-27.45%
YUM
Yum! Brands
155.15
12.45
8.72%
Arcos Dorados Holdings Corporate Events
Arcos Dorados Posts Strong First-Quarter 2026 Profit and Revenue Growth
May 20, 2026
On May 20, 2026, Arcos Dorados reported unaudited results for the quarter ended March 31, 2026, showing revenues of $1.22 billion, up from $1.08 billion a year earlier, driven mainly by higher sales at company-operated restaurants. Operating incom...
Arcos Dorados Delivers Record First-Quarter 2026 Results on Strong Sales and Margin Gains
May 20, 2026
In the first quarter of 2026, Arcos Dorados reported total revenue of $1.216 billion, a 12.9% increase in U.S. dollars versus a year earlier, with systemwide comparable sales up 16.0% and digital channels accounting for 64% of sales. Adjusted EBIT...
Arcos Dorados Shareholders Approve 2025 Results and Board Slate at 2026 AGM
Apr 14, 2026
Arcos Dorados Holdings announced that at its Annual General Shareholders’ Meeting held in Montevideo on April 10, 2026, investors approved all proposals, including the company’s financial statements for the fiscal year ended December 3...
Arcos Dorados Reviews Record 2025 Results and Sets April 10, 2026 Shareholder Meeting
Mar 26, 2026
In a March 26, 2026 letter to shareholders, CEO Luis Raganato reviewed 2025 as a mixed year, noting systemwide comparable sales that kept pace with blended inflation and record Adjusted EBITDA of $575.2 million, supported by strong performance in ...
Arcos Dorados Files 2025 Audited Financials, Auditor Flags Brazilian Tax Risks
Mar 19, 2026
Arcos Dorados Holdings Inc. has filed its Form 6-K for March 2026, disclosing audited consolidated financial statements for the years ended December 31, 2025, 2024 and 2023. The filing includes income, comprehensive income, balance sheet, cash flo...
Arcos Dorados Posts Record 2025 EBITDA on Strong Digital Sales and Network Expansion
Mar 19, 2026
On March 19, 2026, Arcos Dorados reported its fourth-quarter and full-year 2025 results, highlighting total revenue of $1.3 billion for the quarter and $4.7 billion for the year, up 10.7% and 4.7% in U.S. dollars, respectively versus 2024. Systemw...
Arcos Dorados Sets April 10, 2026 Date for Annual Shareholders’ Meeting
Mar 6, 2026
Arcos Dorados Holdings Inc., the world’s largest independent McDonald’s franchisee, operates the biggest quick service restaurant chain in Latin America and the Caribbean. With exclusive rights across 21 countries and territories, it m...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.