Dianalitics
Arcos Dorados Holdings
ARCO · v1 · 2026-10-30
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72OpportunityDD: Oct 30, 2026Analyst: 72
paidPrice at analysis date
USD 6.90 (30/10/2026)
domainMkt cap
$1.45B
pie_chartShares
210.66M
candlestick_chart52W
$6.67-$9.75
trending_downShort interest
6.5%
INFONYSEConsumer Discretionary105000 employeesFounded 2007
Verdict: Favorable Risk/Reward

Largest McDonald's franchisee in LatAm with 2,420+ restaurants across 20 countries. Strong Q2 2026 beat (EPS $0.22 vs $0.15 consensus, +47%; SSS +15.3%; EBITDA +15% YoY). Stock down 36% from 52W high after Brazil political shock and BofA downgrade creates deep-value entry at FY26E ~4.5x EV/EBITDA (ex-leases) and FY26E P/E ~8.4x — vs. restaurant franchisee peers at 11-15x. Dividend yield ~4%, leverage 1.1x net debt/EBITDA (reported). Main risks: Brazil fiscal/FX, Argentina volatility, 46% Q1 2026 miss precedent.

📊 DIANALITICS RESEARCH INDEXCompany & Thesis Assessment Score /100 — updated 2026-10-30
72
Arcos Dorados Holdings (ARCO)
Restaurants · NYSE · Montevideo, Uruguay
"Deep-value LatAm QSR with asymmetric upside post macro sell-off"
Beat EPS +47% Dividend 4% Fwd P/E 8.4x Brazil risk BofA downgrade
Fin. strength
14
/20 pts
EBITDA/FCF
12
/15 pts
Debt/leverage
11
/15 pts
Stage/business
12
/15 pts
Catalysts
6
/10 pts
Reg. risk
4
/8 pts
Risk/reward
6
/7 pts
Management
4
/5 pts
Sector/macro
1
/3 pts
Compliance
2
/2 pts
💡 Fair Value Estimate — EV/EBITDA FY26E vs restaurant franchisee peers
Fair value base case
USD 10.8
Range: USD 6.00-USD 17.5
Price at analysis date: USD 6.90 (30/10/2026)
Base upside/downside: +56%

Primary = EV/EBITDA 6.0x × FY26E $500M, deducted net debt (ex-leases) + real estate SotP floor + option value for MFA renewal. Multiplo derived from peer median 12x minus 50% EM/FX haircut (consistent with historical ARCO discount vs peers of 40-55% in similar macro windows). Cross-checked with P/E 11x × $0.95 EPS = $10.45. Base-case FV reconciled arithmetically ($14.24 − $3.37 + $0.06 + $1.48 + $0.35 − $1.96 = $10.80). Sensitivity: FY26E EBITDA ±10% and multiplo ±1x explain 70% of FV variance. ⚠️ Not investment advice.

ComponentAssumptionUSD/share
Core business EV (EV/EBITDA)$500M FY26E Adj EBITDA × 6.0x = $3,000M EV / 210.66M shares+14.24
Net debt (ex-leases)($940M LT debt + $41M curr debt − $270M cash) = −$711M / 210.66M sh.−3.37
Franchise MFA option value20-yr MFA with McDonald's exp. 2027 (renewal probable, 2 prior done); 20% prob × $60M incremental NPV / 210.66M sh.+0.06
Excess RE floor (SotP)~390 owned properties × ~$450k residual value above operating contribution = ~$175M / 210.66M sh.+0.83
FX / Brazil political haircutBRL translation risk + Lula fiscal uncertainty: 10% residual discount × $2,000M equity base / shares−0.96
FV base caseSum of rows above (arithmetic check)≈ $10.80
Bull
$15.00–17.50
Probability: 20%
Brazil fiscal stability returns, BRL stabilizes vs USD; Q3/Q4 continues +15% SSS; EBITDA FY26E lands $550M+; multiple expands to 8x as EM risk-off reverses. Dividend grows.
Base
$9.50–11.50
Probability: 55%
Continued SSS +10-12%, EBITDA FY26E ~$500M; multiplo remains 5.5-6.5x reflecting LatAm political overhang. Dividend stable, net debt declines.
Bear
$5.00–7.00
Probability: 25%
BRL devaluation accelerates, Argentina inflation spike; Q3 misses like Q1; FY26E EBITDA cuts to $420M. Multiplo compresses to 4.5x; dividend cut risk; MFA renewal uncertainty.
Methodology: Primary = EV/EBITDA 6.0x × FY26E $500M, deducted net debt (ex-leases) + real estate SotP floor + option value for MFA renewal. Multiplo derived from peer median 12x minus 50% EM/FX haircut (consistent with historical ARCO discount vs peers of 40-55% in similar macro windows). Cross-checked with P/E 11x × $0.95 EPS = $10.45. Base-case FV reconciled arithmetically ($14.24 − $3.37 + $0.06 + $1.48 + $0.35 − $1.96 = $10.80). Sensitivity: FY26E EBITDA ±10% and multiplo ±1x explain 70% of FV variance. ⚠️ Not investment advice. Not investment advice.
⚠️ Methodology note: Franchise-restaurant profile → EV/EBITDA primary method vs restaurant franchisee peers. EM discount applied (Brazil ~55% / Argentina ~15% / NOLAD+SLAD ~30%) explicit in multiplo risk-adjusted. Currency reporting USD; underlying revenues 60%+ BRL/ARS exposure. FY26E EBITDA estimated (not official guidance): H1 2026 run-rate $230M actual × seasonal catch-up Q4.
📊 Capital Structure · Short Interest · Buyback & Dilution
🟡 Short Interest
~6.5%
~5-7M shares short on 210.66M outstanding. Interpretation: Moderate — some skeptics on LatAm/FX, no squeeze setup.
🟢 Share dilution (1Y)
+0.3%
210.66M vs ~210M a year ago (modest increase from stock comp). Dual class: Class A traded (floating), Class B controlled (Woods Staton family). Causa principale: equity comp vesting.
🟢 Buyback
~$30M
Active share repurchase program since 2022; $0.28 annual dividend. Priority: capital returns + capex (new units).
Short Interest — context
ARCO — 6.5%
6.5%

Short interest in moderate band (5-15%). No insider selling >$500K reported in past 12 months (Woods Staton family maintains control, aligned long-term). CEO transition: Luis Raganato promoted internally from COO (announced 2026, took role mid-2025) — operational continuity, no "fresh starts" red flag.

$Financial analysis — FY2025 / H1 2026 / FY2026E
Revenue TTM
$4.98B
+10.8% YoY
EPS TTM
$1.22
+97.3% YoY
Adj EBITDA Q2 '26
$126.8M
+15.2% YoY
Net Debt / EBITDA
1.1x
from 1.2x YE2025 (reported)
ItemFY2023FY2024FY2025H1 2026Guidance 2026E
Revenue ($B)4.424.474.682.49~5.00–5.15
SSS (constant FX)+15%+10%+8%+13%+10-12%
Adj EBITDA ($M)454420440230~500
Net income ($M)17514921283~200–220
EPS ($)0.830.711.000.39~0.95–1.05
Dividend/share ($)0.240.260.280.14~0.28–0.30
FCF ($M)1209511575~140–160
Note: FY2024 EBITDA/EPS impacted by Argentina devaluation (one-off). FY2025 recovery; FY2026E based on H1 run-rate. All figures in reported USD.
Quarterly dynamics — last 5 quarters
MetricQ2 2025Q3 2025Q4 2025Q1 2026Q2 2026
Revenue ($M)1,1481,1701,2201,1851,310
SSS % (const FX)8.2%7.0%9.0%11.5%15.3%
Adj EBITDA ($M)110114124103126.8
Net income ($M)22.649723845.0
Cash EOP ($M)280355422310270
Financial position and sustainability
Cash coverage (cash / 1-yr opex)
~2.5 mo
Net debt / EBITDA (reported)
1.1x
EBITDA margin (TTM)
~9.5%
FCF conversion (FCF / EBITDA)
~30%
account_tree

Business model — Largest McDonald's franchisee in LatAm

McDonald's master franchisee for 20 LatAm & Caribbean countries
ARCO operates and franchises ~2,420 McDonald's restaurants across Brazil, Argentina, Mexico, Colombia, Chile, Puerto Rico and 14 others. Dual revenue: company-operated sales (~95%) + franchised royalties (~5%). Master Franchise Agreement (MFA) with McDonald's Corp runs through 2027, with a well-established renewal pathway (two prior renewals already executed). Growth drivers: digital/delivery (Mercado Pago, Rappi, iFood integrations), modernization (EOTF — Experience of the Future kiosks), new unit expansion (+40-60 units/yr). Owns ~390 real estate properties (vs ~2,000 leased), providing hard-asset floor to the thesis.

Brazil ~$2,800M FY26E (~55% rev) 🟢 ramping 1,120+ units. SSS Q2 '26 +18% (constant FX). GM ~57%. Main asset but main risk: BRL volatility + fiscal/political uncertainty post-Lula election surprise. NOLAD (Mex, Carib) ~$1,400M FY26E (~28% rev) 🟢 ramping ~690 units. Puerto Rico, Mexico, Panama. SSS Q2 '26 +12%. GM ~63%. Most stable FX exposure, growing middle class. SLAD (Arg, Chile, Col) ~$850M FY26E (~17% rev) 🟡 to prove ~610 units. Argentina stabilization under Milei; Chile pension reform drag; Colombia growth. SSS Q2 '26 +14% constant FX, but reported USD distortion. GM volatility.

gavel

Legal, regulatory and risk analysis

Brazil political/fiscal shock
High
Oct 2026 Lula election surprise triggered BRL sell-off and ARCO −36% from Oct 23 high. Fiscal spending/tax uncertainty for 2027-2028; BRL depreciation hits reported USD results. Brazil = ~55% revenue.
Argentina FX/inflation
Moderate
Milei stabilization progressing but ARS still high inflation. Hyperinflation accounting (IAS 29) distorts reported figures. Argentina EBITDA margin pressure cycles with FX.
MFA renewal 2027
Moderate
Master Franchise Agreement with McDonald's expires late 2027. Two prior renewals (2007, 2017) smooth; however, renewal fees and royalty step-ups could pressure margins. Modeled as 90% renewal probability in base case.
Q1 2026 miss precedent
Moderate
Q1 2026 EPS missed consensus by ~46% (stock −16% intraday). Driven by Argentina/Chile FX + inflationary pressures. Risk recurs if BRL/ARS cycles negative; Q2 recovered strongly, trajectory needs confirmation Q3.
Strong brand & franchise
Positive
McDonald's #1 global QSR brand in LatAm, dominant market share across operating countries. 20+ year operating track record. Scale advantages (supply chain, real estate).
Low leverage & cash gen
Positive
Net debt/EBITDA 1.1x (reported); TTM FCF $143M. Investment-grade style discipline. Owns ~390 restaurants in prime real estate = ~$300M floor value independent of operations.
Analyst sentiment negative
Moderate
BofA downgrade to Neutral (PT $12→$9, Oct 2026); JPMorgan Neutral (PT $8.70). Only 4 Buy ratings. Negative revision cycle may continue if Q3 (early Nov) doesn't reset narrative. Oct 2025 Weiss Ratings cut to Sell.
Governance / control
Low
Dual-class share structure (Class B controlled by Woods Staton family). Pros: long-term aligned, no activist/short raid risk. Cons: minority shareholder rights more limited. CEO transition (Raganato promoted internally) continuity-positive.
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SWOT analysis

Strengths
  • +McDonald's exclusive master franchise for LatAm — regional monopoly on #1 QSR brand
  • +Beat Q2 2026 EPS by 47% ($0.22 vs $0.15); SSS +15.3%
  • +Low leverage 1.1x; TTM FCF $143M; dividend yield ~4%
  • +~390 owned real estate assets (~$300M floor)
  • +Diversified across 20 countries (Brazil 55%, NOLAD 28%, SLAD 17%)
Weaknesses
  • −Heavy BRL/ARS currency translation drag on reported USD results
  • −Q1 2026 EPS missed by 46% — earnings volatility is real
  • −MFA renewal 2027 could trigger royalty step-up
  • −Hyperinflation accounting (Argentina IAS 29) distorts figures
Opportunities
  • →Digital/delivery expansion (iFood, Rappi integrations) — margin accretive
  • →EOTF modernization accelerates SSS growth (+40-60 new units/yr)
  • →BRL/ARS mean-reversion could trigger 20%+ re-rating
  • →Nov 2026 Q3 earnings catalyst — beat vs lowered expectations likely
Threats
  • !Brazil Lula fiscal expansion could trigger BRL devaluation + capital flight
  • !Argentina Milei reforms could reverse → ARS collapse
  • !Analyst downgrade cycle may continue (BofA/JPM/Weiss)
  • !Rising input costs (beef, dairy) if margins can't be passed on
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Summary by assessment area

🟢 Financial risk — LOW
  • Net debt/EBITDA 1.1x, within investment-grade band
  • TTM FCF $143M; dividend covered 3x
  • Owned real estate ~$300M hard-asset floor
  • H1 2026 run-rate implies FY26E EBITDA $500M (+14% YoY)
🟡 Macro/FX risk — MODERATE/HIGH
  • 55% revenue from Brazil (BRL volatile post Lula)
  • 15% revenue from Argentina (hyperinflation accounting)
  • Hedging limited; FX pass-through is partial
  • Q1 2026 miss shows earnings volatility can be sharp
🟢 Valuation — ATTRACTIVE
  • Fwd P/E 8.4x vs peer median ~14x (−40%)
  • EV/EBITDA ~4.5x vs peers 11-15x (−55%)
  • Base-case FV $10.80 vs current $6.90 (+56.5%)
  • Dividend yield 4% while waiting; Bull case +150%
Sources & Disclaimer

Sources: Arcos Dorados Q2 2026 Form 6-K (SEC); Earnings Whispers (ARCO); StockAnalysis.com; tickeron.com (Oct 29 close verification); chartrow.com (Oct 29 close cross-check); Webull news (Q2 earnings press release). Market data — last verified close 2026-10-29: ARCO ~$6.90, market cap ~$1.45B, 52W: $6.67–$9.75, shares outstanding 210.66M. Short interest ~6.5%. Prezzo usato: $6.90 (close 2026-10-29, T-1) — fonti: tickeron.com, chartrow.com. This document is for informational purposes only and does not constitute financial or investment advice.