Arcos Dorados (NYSE:ARCO) Issues Earnings Results

Key Points

• Arcos Dorados exceeded quarterly expectations: EPS came in at $0.22 versus the $0.15 consensus, while revenue reached $1.31 billion compared with estimates of $1.28 billion.
• Operating momentum was strong: Constant-currency revenue increased more than 14% year over year, adjusted EBITDA rose over 20% to $126.8 million, and digital sales grew more than 25% to approximately 66% of total sales. Brazil led the improvement, though consumer weakness persisted in some other markets.
• Growth and balance-sheet metrics improved: Net leverage fell to 1.1 times, the company repaid its 2029 senior notes, opened 35 restaurants in the first half, and reduced new-store capital costs by 15%–20%. Analysts maintain a “Moderate Buy” consensus with an average price target of $10.50.

Arcos Dorados (NYSE:ARCO - Get Free Report) issued its quarterly earnings results on Thursday. The restaurant operator reported $0.22 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.15 by $0.07, FiscalAI reports. Arcos Dorados had a net margin of 4.86% and a return on equity of 10.47%. The firm had revenue of $1.31 billion for the quarter, compared to the consensus estimate of $1.28 billion.

Here are the key takeaways from Arcos Dorados' conference call:

• Record quarterly performance: Revenue reached $1.3 billion, up more than 14% year over year in constant currencies, while adjusted EBITDA rose over 20% to $126.8 million and net income and EPS reached record second-quarter levels.
• Digital and brand engagement strengthened: Digital sales increased more than 25% and represented approximately 66% of total sales, identified sales exceeded 28%, and guest-traffic market share gained roughly 0.5 percentage points across the region.
• Brazil rebounded materially: Value offerings, targeted digital promotions, and FIFA World Cup marketing drove positive traffic and comparable-sales momentum, while lower food and paper costs, operating leverage, and G&A savings expanded Brazil’s EBITDA margin by 180 basis points to 14.6%.
• Consumer conditions remain challenging in several markets: NOLAD faced a difficult comparison base and pressured spending, while SLAD margins were broadly flat and Argentina experienced continued consumer weakness and food-and-paper cost pressure.
• Financial flexibility and growth investment remain strong: Net leverage improved to 1.1 times, the company fully repaid its 2029 senior notes, opened 35 restaurants in the first half, and reduced average new-store capital costs by approximately 15%–20% while continuing portfolio modernization.

Arcos Dorados Stock Up 3.5%

Arcos Dorados stock traded up $0.28 during trading on Thursday, hitting $8.18. 1,458,356 shares of the company were exchanged, compared to its average volume of 1,314,916. The company has a market capitalization of $1.72 billion, a P/E ratio of 7.36 and a beta of 0.48. The business's 50 day moving average is $8.29 and its 200 day moving average is $8.42. Arcos Dorados has a 52 week low of $6.54 and a 52 week high of $9.75. The company has a current ratio of 0.80, a quick ratio of 0.73 and a debt-to-equity ratio of 1.25.

Institutional Trading of Arcos Dorados

Several institutional investors have recently made changes to their positions in ARCO. Global Retirement Partners LLC boosted its holdings in Arcos Dorados by 9,074.6% during the fourth quarter. Global Retirement Partners LLC now owns 5,780 shares of the restaurant operator's stock worth $42,000 after purchasing an additional 5,717 shares during the last quarter. Quarry LP bought a new position in shares of Arcos Dorados during the 3rd quarter worth approximately $45,000. Aquatic Capital Management LLC bought a new position in shares of Arcos Dorados during the 3rd quarter worth approximately $53,000. Virtu Financial LLC purchased a new position in shares of Arcos Dorados in the 3rd quarter worth approximately $87,000. Finally, Sei Investments Co. purchased a new position in shares of Arcos Dorados in the 3rd quarter worth approximately $106,000. Institutional investors own 55.91% of the company's stock.

Analysts Set New Price Targets

A number of analysts have commented on the stock. Weiss Ratings cut shares of Arcos Dorados from a "hold (c+)" rating to a "hold (c)" rating in a research report on Monday, June 29th. Zacks Research cut Arcos Dorados from a "strong-buy" rating to a "hold" rating in a research note on Monday. Santander upgraded shares of Arcos Dorados to an "outperform" rating in a research report on Monday, April 20th. Wall Street Zen upgraded shares of Arcos Dorados from a "hold" rating to a "buy" rating in a report on Saturday, May 23rd. Finally, JPMorgan Chase & Co. raised shares of Arcos Dorados from a "neutral" rating to an "overweight" rating and lifted their price target for the company from $9.00 to $10.50 in a research note on Friday, July 17th. Three analysts have rated the stock with a Buy rating and two have assigned a Hold rating to the company's stock. According to data from MarketBeat.com, Arcos Dorados has an average rating of "Moderate Buy" and an average target price of $10.50.

About Arcos Dorados

Arcos Dorados Holdings Inc is the largest independent McDonald's franchisee in the world, operating under an exclusive license agreement with McDonald's Corporation. The company develops, owns and operates quick-service restaurants, offering the full McDonald's menu, including hamburgers, chicken sandwiches, salads, sides, desserts and McCafé beverages. In addition to restaurant operations, Arcos Dorados manages supply chain logistics, property development, training and support services for its franchise network.

Headquartered in Montevideo, Uruguay, Arcos Dorados serves 20 markets across Latin America and the Caribbean, including Argentina, Brazil, Chile, Colombia, Mexico, Puerto Rico and Uruguay.

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