With its huge network of McDonald’s Corporation (NYSE:MCD) franchises throughout Latin America, Arcos Dorados Holding Inc (NYSE:ARCO) has capitalized on the rise of the consumer middle class in many emerging-market countries. But lately, the company has seen its formerly rapid growth pace slow down substantially. Let’s take an early look at what’s been happening with Arcos Dorados Holding Inc (NYSE:ARCO) over the past quarter, and what we’re likely to see in its quarterly report.
Stats on Arcos Dorados
| Analyst EPS Estimate | $0.06 |
| Change From Year-Ago EPS | (50%) |
| Revenue Estimate | $960.4 million |
| Change From Year-Ago Revenue | 4.2% |
| Earnings Beats in Past 4 Quarters | 0 |
Source: Yahoo! Finance.
Can Arcos Dorados look golden again?
Analysts have pulled back on their earnings expectations for Arcos Dorados in recent months, reducing their calls for the just-ended quarter by $0.08 per share, and reducing full-year 2013 and 2014 estimates by $0.09 and $0.13 per share, respectively. The stock has pulled back on that pessimism, falling about 6% since mid-January.
After impressive growth for such a long time, Arcos Dorados Holding Inc (NYSE:ARCO) has had to deal with challenging conditions in Latin America for more than a year now. The stock plunged 40% during 2012, as the region faced a tough economic environment that held back Arcos’ business, and those conditions haven’t improved quickly enough to get earnings moving higher yet. The recent currency devaluation in Venezuela back in February was just the latest economic hit for the company and, with a significant presence in the country, Arcos will have to keep watching Venezuela to make sure it protects its interests there in the aftermath of former Venezuelan President Hugo Chavez’s death.
Moreover, Arcos has had to deal with some competition to its business model. Late last year, Burger King Worldwide Inc (NYSE:BKW) finally allowed a multinational joint venture to go forward to develop Central American markets. If that deal spreads into South America, as well, it could pose a more unified threat to Arcos Dorados Holding Inc (NYSE:ARCO).
Still, in assessing Arcos Dorados’ report, you shouldn’t fall prey to too much pessimism about the growth opportunities in the fast-food franchisee’s home markets. Instead, watch for where the company sees the best prospects for the future, and see how it plans to make the most of those opportunities. After its share-price plunge, Arcos Dorados Holding Inc (NYSE:ARCO) stock could soar if it can get its growth back on track.
The article Arcos Dorados Faces a Growth Slowdown originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Burger King Worldwide and McDonald’s. The Motley Fool owns shares of Arcos Dorados and McDonald’s.
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