Arcos Dorados Holdings (ARCO) AI Stock Analysis

• Market Cap: $1.62B
• Dividend Yield: 3.27%
• Average Volume (3M): 1.31M
• Price to Earnings (P/E): 7.3
• Beta (1Y): 0.37
• Revenue Growth: 1.21%
• EPS Growth: 67.88%
• Country: US
• Employees: 100,000
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): 0.12
• Shares Outstanding: 130,663,060
• 10 Day Avg. Volume: 952,325
• 30 Day Avg. Volume: 1,311,070
• PEG Ratio: 0.17
• Price to Book (P/B): 2.01
• Price to Sales (P/S): 0.33
• P/FCF Ratio: 103.13
• Enterprise Value/Market Cap: 2.16
• Enterprise Value/Revenue: 0.75
• Enterprise Value/Gross Profit: 6.08
• Enterprise Value/Ebitda: 6.10
• 1Y Price Target: $9.83
• Price Target Upside: 27.99% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3
• EPS Forecast (FY): 0.7
• Revenue Forecast (FY): $5.16B

• Rating: 60 Neutral
• Price Target: $8.00 ▲(4.17% Upside)
• Action: Downgraded Date: 03/20/26
• Date: Action: Downgraded 03/20/26

The score is held back primarily by balance-sheet leverage and weak/volatile free cash flow, alongside bearish technical momentum. These are partially offset by a very low P/E with a solid dividend yield and a generally positive earnings-call outlook on expansion, cost discipline, and margin improvement (tempered by Brazil cost/traffic and tax/FX-related risks).

Positive Factors

Digital & Loyalty Adoption

High digital penetration (62% of sales) and a 27.2M-member loyalty base create durable customer engagement and lower per-transaction costs. Digital channels boost average check, improve data-driven marketing, and raise lifetime value across markets, supporting steady comp sales and margin resilience.

Unit Growth & Modernization

Sustained unit expansion and modernization scale the network and improve unit economics. A modernized portfolio increases throughput, drive-thru efficiency and digital integrations, enhancing returns on invested capital and supporting structural market-share gains across Latin America over the coming years.

Solid Operating Profitability

Consistent positive operating margins and record adjusted EBITDA indicate core business profitability and operational leverage. Combined with ongoing G&A savings and margin-expansion initiatives, this supports sustainable cash generation capacity assuming cost pressures remain manageable.

Negative Factors

Elevated Leverage

A debt-to-equity around 2.8x leaves the company exposed to interest and currency volatility and constrains financial flexibility for reinvestment or shock absorption. Even with recent liability management, sustained high leverage increases refinancing and covenant risk across economic cycles.

Weak & Volatile Free Cash Flow

Near-breakeven TTM free cash flow and prior-year negative FCF limit the firm's ability to self-fund capex, pay consistent dividends, and accelerate debt reduction. Cash conversion lagging net income (~1%) raises reliance on external financing for growth and increases sensitivity to margin swings.

Brazil Tax & Market Risks

Material Brazilian tax contingencies and volatile local conditions (traffic declines, beef inflation) create recurring earnings and cash-flow uncertainty in a core market. Tax exposures and sector-specific cost shocks can impair sustainable profitability and complicate comparability of reported results.

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, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curacao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela. As of December 31, 2021, it operated or franchised 2,261 restaurants. The company was founded in 2007 and is based in Montevideo, Uruguay.

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 digital ordering (e.g., mobile/app or kiosks where available). In addition to company-operated restaurant sales, Arcos Dorados earns revenue from franchising arrangements in its territory, which generally include collecting franchise-related fees and ongoing payments from franchisees (e.g., royalties and/or other service-related charges, depending on contract terms). The company’s earnings are also influenced by its licensing relationship with McDonald’s Corporation as the master franchisee, under which it operates the brand in the region and typically pays brand-related fees (e.g., royalties) while benefiting from McDonald’s brand, menu, and operating system. Key factors that can materially affect revenue and profitability include restaurant traffic and average check, pricing and promotional strategy, product mix (including beverages and bundled meals), delivery and digital penetration, expansion/remodeling activity, commodity and labor costs, foreign exchange movements across Latin American currencies, and the performance of franchised restaurants where applicable.

Arcos Dorados Holdings Financial Statement Overview

Summary

Income statement strength (Score 72) is offset by elevated leverage on the balance sheet (Score 45; debt-to-equity ~2.8x) and very weak/volatile free cash flow generation (Score 38; TTM FCF near breakeven after meaningfully negative 2024). Overall financial risk remains above average despite solid profitability.

Income Statement

TTM (Trailing-Twelve-Months) revenue is up modestly (~2.7%) and profitability is solid for the sector with positive operating and net margins (about 12.5% EBITDA margin and ~5.4% net margin). Earnings improved versus 2024, showing continued recovery from the 2020 loss period. The key offset is that margin performance has eased versus 2022–2023 levels (gross margin has trended down), suggesting some pressure from costs and/or pricing power limits.

Balance Sheet

Leverage remains the central risk: TTM (Trailing-Twelve-Months) debt is high relative to equity (debt-to-equity ~2.8x), even though it has improved from very elevated levels earlier in the period. Equity has grown, and returns on equity are strong, but those returns are amplified by leverage. Overall, the balance sheet looks functional but still carries above-average financial risk for a restaurants business.

Cash Flow

Operating cash generation is steady, but cash conversion is weak: TTM (Trailing-Twelve-Months) free cash flow is close to breakeven (~$11M) despite positive net income, and free cash flow is only about ~1% of net income. 2024 free cash flow was meaningfully negative, highlighting volatility and/or elevated reinvestment needs, even though TTM improved sharply versus that weak year.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	4.68B	4.47B	4.33B	3.62B	2.66B
Gross Profit	574.12M	586.42M	597.14M	492.61M	324.06M
EBITDA	571.76M	502.88M	464.44M	384.24M	247.73M
Net Income	212.12M	148.76M	181.27M	140.34M	45.49M
Balance Sheet
Total Assets	3.89B	2.89B	3.02B	2.64B	2.36B
Cash, Cash Equivalents and Short-Term Investments	422.35M	138.59M	246.77M	304.40M	278.83M
Total Debt	2.25B	1.72B	1.69B	1.56B	1.53B
Total Liabilities	3.11B	2.38B	2.50B	2.31B	2.14B
Stockholders Equity	770.49M	508.08M	515.28M	323.62M	220.43M
Cash Flow
Free Cash Flow	14.99M	-60.79M	21.87M	128.32M	143.04M
Operating Cash Flow	296.34M	266.85M	381.96M	345.44M	258.04M
Investing Cash Flow	-335.03M	-280.33M	-380.35M	-259.65M	-108.28M
Financing Cash Flow	288.75M	-37.16M	-11.82M	-59.98M	-17.93M

Arcos Dorados Holdings Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 7.68
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARCO, the sentiment is Negative. The current price of 7.68 is below the 20-day moving average (MA) of 8.19, below the 50-day MA of 8.15, and above the 200-day MA of 7.38, indicating a neutral trend. The MACD of -0.17 indicates Positive momentum. The RSI at 36.84 is Neutral, neither overbought nor oversold. The STOCH value of 19.88 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ARCO.

Arcos Dorados Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MCD	75 Outperform	$219.41B	25.46	-336.89%	2.31%	1.26%	2.87%
YUM	74 Outperform	$43.24B	26.98	-20.57%	1.84%	11.60%	-4.33%
DPZ	67 Neutral	$12.56B	23.81	-15.28%	1.63%	3.92%	4.98%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
ARCO	60 Neutral	$1.62B	7.29	32.50%	3.27%	1.21%	67.88%
WEN	57 Neutral	$1.35B	9.79	140.58%	8.15%	-0.21%	0.16%
PZZA	48 Neutral	$1.13B	42.31	-6.99%	4.72%	-0.64%	-60.71%

Arcos Dorados Holdings Corporate Events

Arcos Dorados Files 2025 Audited Financials, Auditor Flags Brazilian Tax Risks

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 flow and equity statements, along with detailed notes, covering the group’s financial position at the end of 2025.

The report, signed on March 19, 2026, confirms that independent auditor Pistrelli, Henry Martin y Asociados S.A., a member of Ernst & Young Global, issued an unqualified opinion stating the statements fairly present the company’s results under U.S. GAAP. The auditors also highlighted tax contingencies in Brazil as a critical audit matter, underscoring the significance and complexity of the group’s Brazilian tax exposures for investors monitoring regional risk.

The most recent analyst rating on (ARCO) stock is a Hold with a $9.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados Posts Record 2025 EBITDA on Strong Digital Sales and Network Expansion

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. Systemwide comparable sales rose 16.0% in the quarter and 13.0% for the year, broadly tracking blended inflation, while consolidated Adjusted EBITDA reached a record $575.2 million and net income totaled $212.1 million for 2025.

Digital channels remained a key growth engine, accounting for 61% of 2025 systemwide sales and 62% in the fourth quarter, supported by self-order kiosks, delivery and a loyalty program that reached 27.2 million members across nine countries by year-end. The company expanded its footprint with 102 restaurant openings in 2025, exceeding guidance while cutting total capex versus 2024, secured a $159 million net tax benefit in Brazil expected to convert to cash over five years, and the board declared a 2026 cash dividend of $0.28 per share, underscoring confidence in continued profitable growth.

The most recent analyst rating on (ARCO) stock is a Hold with a $9.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados Sets April 10, 2026 Date for Annual Shareholders’ Meeting

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 manages more than 2,500 McDonald’s restaurants and employs over 100,000 staff, positioning the NYSE-listed group as a leading regional player in branded fast food.

On March 6, 2026, Arcos Dorados’ board set April 10, 2026 as the date for its Annual General Shareholders’ Meeting in Montevideo, Uruguay, for shareholders of record as of March 16, 2026. The scheduling of the AGM marks a key governance milestone for investors, providing a formal forum for oversight and engagement as the company advances its growth and sustainability agenda in Latin America’s quick service restaurant market.

The most recent analyst rating on (ARCO) stock is a Hold with a $9.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados Signals Stronger-Than-Expected Q1 2026 Sales Trend

On February 13, 2026, Arcos Dorados Holdings Inc. moved to counter market speculation about a slowdown by clarifying its expected first-quarter 2026 performance. The company said that, contrary to recent commentary linking macroeconomic pressures in parts of Latin America to weaker trading, it anticipates higher systemwide comparable sales growth in the first quarter of 2026 than it recorded in the fourth quarter of 2025.

Management also highlighted that several key local currencies are stronger so far this year than at the start of 2025, which should translate into higher U.S. dollar revenue alongside constant-currency growth in comparable restaurants. Arcos Dorados plans to release its fourth-quarter and full-year 2025 audited results on March 19, 2026, with first-quarter 2026 figures scheduled for mid-May, giving investors forthcoming checkpoints to verify the company’s more upbeat outlook against prior market expectations.

The most recent analyst rating on (ARCO) stock is a Hold with a $9.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados B.V. Reports Strong Early Take-Up in Tender Offer for 2029 Sustainability-Linked Notes

On February 12, 2026, Arcos Dorados B.V., a subsidiary of Arcos Dorados Holdings Inc., reported early results for its cash tender offer targeting up to U.S.$150 million of its 6.125% sustainability-linked senior notes due 2029. By the early tender deadline that day, investors had tendered about U.S.$134.8 million in principal, representing roughly 38.51% of the notes outstanding, locking in eligibility for the higher total consideration.

The offer, which remains open until 5:00 p.m. New York City time on March 2, 2026, forms part of the company’s active management of its sustainability-linked debt profile. Notes not tendered will remain outstanding with all existing rights under the indenture, while the company retains discretion to amend or terminate the offer subject to the conditions set out in the tender documentation.

The most recent analyst rating on (ARCO) stock is a Hold with a $9.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados Taps Brazilian Debt to Cut Cost of Sustainability-Linked Notes

On February 2, 2026, Arcos Dorados announced a capital structure optimization following a financing move completed in December 2025, when its Brazilian subsidiary secured $150 million in new bank debt maturing in 2029. Using derivative instruments to manage interest rate and currency risk, the company effectively reduced the new borrowing’s estimated U.S. dollar cost to 2.53% and plans to use the proceeds to fund a tender offer of up to $150 million of its 6.125% Sustainability-Linked Senior Notes due 2029. If the tender offer, announced on January 30, 2026, is fully accepted, Arcos Dorados expects to cut the average U.S. dollar cost of its long-term debt by about 55 basis points without materially changing debt maturity, foreign currency exposure or net leverage, reinforcing its strategy to support growth of the McDonald’s brand across its 21 markets while maintaining an efficient, sustainability-linked funding profile.

The most recent analyst rating on (ARCO) stock is a Buy with a $9.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados B.V. Launches Tender Offer for Up to US$150 Million of 2029 Notes

On January 30, 2026, Arcos Dorados B.V., a subsidiary of Arcos Dorados Holdings Inc., launched a cash tender offer to repurchase up to US$150 million in aggregate principal amount of its outstanding 6.125% sustainability-linked senior notes due 2029, out of a total of US$350 million outstanding. The offer, which runs until March 2, 2026, provides an incentive for early participation by paying US$1,030 per US$1,000 principal amount to noteholders who tender by February 12, 2026, including a US$30 early tender payment, and US$1,000 per US$1,000 thereafter, with tenders subject to proration if they exceed the maximum amount. The transaction, which is not contingent on a minimum tender, is designed to actively manage the company’s debt profile while leaving any untendered notes outstanding with unchanged rights under the existing indenture, and it underscores Arcos Dorados’ ongoing balance-sheet management in support of its Latin American restaurant operations.

The most recent analyst rating on (ARCO) stock is a Hold with a $8.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.

Arcos Dorados Sets 2026 Restaurant Expansion and Capex Targets After 102 Openings in 2025

On January 28, 2026, Arcos Dorados reported that it opened 102 restaurants in 2025, including 88 free-standing units and 73 company-operated locations, with the bulk of new stores in Brazil, and set guidance to open 105 to 115 restaurants across its Latin American and Caribbean footprint in 2026. The company also indicated that 2025 capital expenditures would come in toward the low end of its prior US$300 million to US$350 million range and projected total capex of US$275 million to US$325 million for 2026 to fund new openings, restaurant modernizations, operational optimizations and IT investments, all to be financed with operating cash flow and existing cash, underscoring its strategy of disciplined, returns-focused expansion in its core markets.

The most recent analyst rating on (ARCO) stock is a Hold with a $8.00 price target. To see the full list of analyst forecasts on Arcos Dorados Holdings stock, see the ARCO Stock Forecast page.