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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on ARCO

Arcos Dorados Holdings Inc.'s recent performance was positively driven by its Q3 earnings beat, with quarterly earnings of $0.12 per share exceeding the Zacks Consensus Estimate of $0.10 per share. The company's solid growth, in line with blended inflation in its markets, also contributed to its performance. Strength in Argentina and Mexico offset weakness in Brazil, where a gradual market recovery is anticipated. Additionally, Envestnet Asset Management Inc. increased its stake in the company by 79.3%, acquiring 191,560 shares. A new $200 million syndicated revolving credit facility also enhanced the company's financial flexibility.

1.c. Company Highlights

2. Arcos Dorados Holdings Inc. Delivers Strong Q3 2025 Results

Arcos Dorados Holdings Inc. reported a robust financial performance for the third quarter of 2025, with total revenue reaching $1.2 billion, a new high for a single quarter. The company's system-wide comparable sales rose 12.7%, in line with blended inflation for the period. Adjusted EBITDA was more than $200 million, including the net benefit of $85.6 million related to a federal tax credit in Brazil. Earnings per share (EPS) came in at $0.12, beating analyst estimates of $0.1. The company's revenue growth was driven by balanced US dollar growth across the three divisions, with Brazil's total revenue growing 4.9% and NOLAD's total revenue rising 6.1% in US dollars.

Publication Date: Nov -14

📋 Highlights
  • Total Revenue Record: Reached $1.2 billion, a new single-quarter high with 4.9% growth in Brazil and 6.1% in NOLAD.
  • Adjusted EBITDA Performance: Generated $200+ million, including $85.6 million from Brazil's tax credit, but declined 3% YoY due to 35% higher beef costs.
  • Digital Sales Leadership: Brazil's digital channels accounted for 72% of system-wide sales, driven by delivery and kiosks.
  • Capital Allocation Strategy: 50% of $22M capex invested in new restaurants, with a 1.2x net debt/EBITDA ratio reflecting strong balance sheet.
  • Margin Recovery Focus: Brazil prioritizes pricing above inflation (12.7% comp sales growth) and operational efficiencies to offset 35% beef cost inflation.

Segment Performance

The company's performance varied across segments, with Brazil delivering positive comp sales despite a challenging market. The growth came from a combination of pricing and mix to increase average check, with the strongest channel being delivery. In Mexico, the company is focused on adding operations improvement and brand campaigns to improve brand attributes and market share gains. Argentina maintained its market share and gap versus the main competitor, despite macroeconomic instability.

Margin Pressures and Cost Management

Margin pressures were evident, mainly related to elevated food and paper costs, particularly in Brazil where beef costs increased by 35% year over year. However, the company is confident that the second quarter was the lowest point of the year and expects to recover gross margin going forward. Mariano Tannenbaum mentioned that payroll, occupancy, and other costs have seen improvements due to the implementation of a scheduling system and better deals with third-party operators.

Valuation Metrics

With a P/E Ratio of 11.87 and an EV/EBITDA of 8.03, the company's valuation appears reasonable. The Net Debt / EBITDA ratio of 4.41 indicates a relatively high debt burden, but the company's strong cash generation and available cash provide a buffer. Analysts estimate next year's revenue growth at 7.2%, which could support a higher valuation multiple. The Dividend Yield of 3.27% is also attractive, providing a floor for the stock.

Outlook and Growth Prospects

The company's growth plan is aligned with its long-term vision to unlock McDonald's full potential in the region. With a focus on profitable markets and restaurant formats, Arcos Dorados is well-positioned to drive growth and improve margins. The World Cup is expected to have a positive impact on brand attributes and traffic, further supporting the company's growth prospects.

3. NewsRoom

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Envestnet Asset Management Inc. Buys 191,560 Shares of Arcos Dorados Holdings Inc. $ARCO

Nov -16

Source: defenseworld.net

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Arcos Dorados: Setting The Focus On Brazil's Recovery

Nov -14

Source: seekingalpha.com

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Arcos Dorados Holdings Inc. (ARCO) Q3 2025 Earnings Call Transcript

Nov -12

Source: seekingalpha.com

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Arcos Dorados (ARCO) Tops Q3 Earnings and Revenue Estimates

Nov -12

Source: zacks.com

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Arcos Dorados Reports Third Quarter 2025 Financial Results

Nov -12

Source: businesswire.com

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New Strong Sell Stocks for Oct. 24

Oct -24

Source: zacks.com

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Volatus Aerospace and ARCO Worldwide Services Establish Landmark Partnership to Deliver Drone Training in Nigeria

Oct -15

Source: globenewswire.com

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Arcos Dorados Holdings Inc. Third Quarter 2025 Results Webcast Date and Time

Oct -15

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.54%)

6. Segments

Company-operated Restaurants

Expected Growth: 5.5%

Arcos Dorados' 5.5% growth in company-operated restaurants is driven by successful menu innovation, increased digital sales, and strategic restaurant remodels. Additionally, the company's focus on customer experience, loyalty programs, and operational efficiencies have contributed to the growth. Furthermore, expansion in high-growth markets and effective marketing campaigns have also supported the segment's growth.

Franchised Restaurants

Expected Growth: 6.5%

Arcos Dorados Holdings Inc.'s franchised restaurants growth of 6.5% is driven by increasing same-store sales, expansion in Latin America, and strategic menu innovations. Additionally, the company's focus on digital transformation, including mobile ordering and delivery, has enhanced customer experience and contributed to sales growth.

7. Detailed Products

McDonald's Restaurants

Arcos Dorados Holdings Inc. operates and franchises McDonald's restaurants in Latin America and the Caribbean.

McCafé

McCafé is a coffee shop-style restaurant concept that offers a variety of coffee, pastries, and sandwiches.

Desayunos

Desayunos is a breakfast-focused concept that offers a variety of breakfast items, including sandwiches, pastries, and coffee.

McDelivery

McDelivery is a delivery service that allows customers to order McDonald's food and beverages online or through a mobile app.

McDrive

McDrive is a drive-thru service that allows customers to order and pick up McDonald's food and beverages without leaving their vehicles.

8. Arcos Dorados Holdings Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Arcos Dorados Holdings Inc. faces moderate threat from substitutes as customers have limited alternatives to McDonald's restaurants, but they can opt for other fast-food chains or prepare meals at home.

Bargaining Power Of Customers

Customers have high bargaining power due to the presence of many fast-food chains and the ease of switching between them. Additionally, customers can easily compare prices and menus online.

Bargaining Power Of Suppliers

Suppliers have low bargaining power due to the large scale of Arcos Dorados Holdings Inc.'s operations and the availability of multiple suppliers for ingredients and materials.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the fast-food industry, including the need for significant capital investment and established brand recognition.

Intensity Of Rivalry

The fast-food industry is highly competitive, with many established players competing for market share. Arcos Dorados Holdings Inc. faces intense rivalry from other McDonald's franchisees and fast-food chains.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 62.55%
Debt Cost 3.95%
Equity Weight 37.45%
Equity Cost 10.25%
WACC 6.31%
Leverage 167.02%

11. Quality Control: Arcos Dorados Holdings Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
RBI

A-Score: 5.8/10

Value: 3.2

Growth: 6.2

Quality: 5.2

Yield: 7.0

Momentum: 4.0

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
Wendy's

A-Score: 5.6/10

Value: 6.3

Growth: 5.9

Quality: 4.8

Yield: 9.0

Momentum: 0.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Domino's Pizza

A-Score: 5.5/10

Value: 4.4

Growth: 6.3

Quality: 6.0

Yield: 3.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Texas Roadhouse

A-Score: 5.5/10

Value: 2.6

Growth: 8.2

Quality: 5.7

Yield: 4.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Arcos Dorados

A-Score: 4.7/10

Value: 5.5

Growth: 3.5

Quality: 2.9

Yield: 6.0

Momentum: 2.0

Volatility: 8.3

1-Year Total Return ->

View Full Report
Stock-Card
Wingstop

A-Score: 4.2/10

Value: 2.5

Growth: 9.4

Quality: 6.3

Yield: 2.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

7.4$

Current Price

7.41$

Potential

-0.00%

Expected Cash-Flows