Arcos Dorados Beats Q3 Estimates: $0.15 EPS, $1.33B Revenue

Arcos Dorados posted $0.15 in third-quarter EPS on Thursday, beating the analyst consensus of $0.14 by a penny and rising from $0.12 a year earlier. Revenue came in at $1.33 billion against estimates of $1.32 billion. The market's verdict was modest: shares edged up $0.06, or 0.8%, to $7.00 in mid-day trading.

By Grace Kim

What drove the quarter?

Revenue rose more than 11% in U.S. dollars, while system-wide comparable sales (sales at restaurants open at least a year) climbed 15.5%, supported by higher average checks and positive guest traffic. Digital sales grew roughly 22% and now make up about two-thirds of system-wide sales.

Underlying adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 9% year over year — that figure excludes an $85.6 million Brazilian federal tax credit booked in the prior-year quarter. The consolidated margin landed at 9.5%. Food and paper costs improved for a third consecutive quarter, though higher labor and other operating costs ate into some of the benefit.

The bottom line held up: net margin of 5.15% and return on equity (net income divided by shareholder equity) of 12.50%.

How strong is the cash engine?

Very. Last-12-month adjusted free cash flow reached $156 million, roughly triple the year-ago level, and net leverage stands at 1.3x. The board approved a program to repurchase and cancel up to $25 million of Class A shares over six months.

What's the long-term plan?

Management laid out ambitions — explicitly labeled long-term objectives, not single-year guidance:

• Mid- to high-single-digit annual revenue growth
• 550–600 restaurant openings from 2027 through 2030
• $1.3–$1.5 billion in capital expenditures over that window

That spending plan is sizable, and the company itself flagged caution. Management said consumers remain cautious and cited wage and labor-cost pressure across divisions. It also said the operational and financial effects of Brazil's labor and tax reforms are not yet clear. Fourth-quarter sales trends are solid so far, though comparable-sales momentum in Brazil has normalized.

What are analysts saying?

The ratings picture is mixed. JPMorgan cut its price objective from $10.50 to $10.00 but kept an "overweight" rating. Bank of America downgraded the stock from "buy" to "neutral" with a $9.00 target on Monday, October 26. On the upside, Zacks moved from "hold" to "strong-buy" on Tuesday, October 20, and Wall Street Zen upgraded to "buy" on Saturday, November 7. Weiss Ratings nudged its rating from "hold (c-)" to "hold (c)" on October 8.

The tally: one Strong Buy, three Buy and two Hold ratings, per MarketBeat.com — a consensus "Moderate Buy" with an average price target of $9.50.

Where does the stock trade?

At $7.00, the stock sits well below its 52-week range of $6.67 to $9.75, and below both its 50-day moving average of $7.54 and 200-day average of $8.17. Volume ran 3,229,990 shares against an average of 1,777,778. The company carries a market cap of $1.47 billion, a P/E ratio of 5.73, a debt-to-equity ratio of 1.14, and a beta of 0.54. Its quick ratio is 0.81 and current ratio 0.88.

Arcos Dorados, the world's largest independent McDonald's franchisee by restaurant count, operates across 20 countries and territories in Latin America and the Caribbean under a master franchise agreement.

Beat on top and bottom lines, cash flow tripled — the question is whether cautious consumers and heavy expansion spending can coexist through 2030.