Buy Rating Affirmed for Arcos Dorados on Strong Sales and Growth Prospects Despite Margin Pressures

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Analyst Javier Martinez Olcoz Cerdan of Morgan Stanley maintained a Buy rating on Arcos Dorados Holdings (ARCO – Research Report), with a price target of $13.00.

Javier Martinez Olcoz Cerdan has given his Buy rating due to a combination of factors related to Arcos Dorados Holdings’ strong performance and growth prospects. The analyst acknowledges that while the company has experienced some margin pressure due to increased costs in delivery channels, IT, and wages in Mexico, these have been partially offset by robust sales growth. Particularly noteworthy is the significant sales acceleration in Brazil and continued strong performance in the Northern Latin American Division, which have contributed to the company’s better-than-expected same-store sales (SSS). Additionally, the anticipation of a new 20-year Master Franchise Agreement (MFA) beginning in January 2025 has created a positive outlook, despite the current lack of disclosed terms. The analyst suggests that the negotiation of the MFA could address some of the margin pressures and further enhance the company’s competitive position. The company’s market share gains and the management’s confidence in the returns of new store openings further support the optimistic stance. With these considerations in mind, and despite some short-term challenges, Martinez Olcoz Cerdan concludes that the risk-reward profile for Arcos Dorados Holdings is favorably skewed, underpinning the Buy recommendation.

ARCO’s price has also changed moderately for the past six months – from $11.980 to $10.040, which is a -16.19% drop .

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Arcos Dorados Holdings (ARCO) Company Description:

Arcos Dorados Holdings, Inc. engages in the operation of restaurants. The firm operates and franchises McDonald’s restaurants in the food services industry through its subsidiaries. It operates through the following geographical segments: Brazil, Caribbean Division, North Latin America division (NOLAD), and South Latin America division (SLAD). The Caribbean Division geographical segment composes Aruba, Curacao, Colombia, French Guyana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the U.S. Virgin Islands of St. Croix, and St. Thomas and Venezuela. The SLAD geographical segment comprises Argentina, Chile, Ecuador, Peru, and Uruguay. The NOLAD geographical segment consists Costa Rica, Mexico, and Panama. The company was founded on August 3, 2007 and is headquartered in Montevideo, Uruguay.

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Buy Rating Affirmed for Arcos Dorados on Strong Sales and Growth Prospects Despite Margin Pressures

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