Arcos Dorados Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Arcos Dorados (NYSE: ARCO  ) is one of them. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

Those who know Spanish will understand the reference to the Golden Arches, as Arcos Dorados is the biggest McDonald's (NYSE: MCD  ) franchisee in Latin America. But with McDonald's having seen some struggles in its own overseas business, has Arcos Dorados dealt with the same challenges? Let's take an early look at what's been happening with Arcos Dorados over the past quarter and what we're likely to see in its quarterly report on Friday.

Stats on Arcos Dorados

Analyst EPS Estimate

$0.22

Change From Year-Ago EPS

(8.3%)

Revenue Estimate

$1.04 billion

Change From Year-Ago Revenue

8.4%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will Arcos Dorados give investors what they want this quarter?
Analysts have kept their fourth-quarter earnings views on Arcos Dorados rock-steady over the past few months. But investors haven't been quite as comfortable, as they've seen their shares lose 1% of their value in a stock market that has generally been soaring.

For years, Arcos Dorados has been an attractive way to play the booming consumer market in emerging economies of Latin America. But during 2012, aggressive action from the Brazilian government to rein in speculation sent its currency reeling, which hurt earnings at Arcos. Yet the company has seen impressive same-store sales when you exclude the currency impact, and Arcos has taken advantage of far less saturation in Brazil and elsewhere in Latin America to push growth aggressively.

However, competitors are using Arcos Dorados' playbook against it. Burger King (NYSE: BKW  ) recently created a joint venture with franchisee Beboca called BK Centro America, which will allow Burger King restaurants throughout the six nations of Central America. Given the success that Arcos has had in South America, Burger King may look for a similar deal there in the future.

One tough situation Arcos Dorados faces is in Venezuela, where recent currency devaluations have now been followed by the death of leader Hugo Chavez. With Arcos Dorados getting nearly 9% of its earnings from Venezuela in the first half of 2012, instability there could prove to be problematic for the franchisee.

In its quarterly report, look for Arcos Dorados to talk about the long-term economic impact of coming global sporting events in Brazil, including the 2014 World Cup and 2016 Olympics. They may seem a long way off, but preparing for all the attention that Brazil will get over the next several years could be critical for Arcos Dorados to build a favorable reputation from the events.

Like Arcos Dorados, McDonald's didn't have a very good performance in 2012. Our top analyst on the company will tell you whether you should be worried by this trend, and he'll shed light on whether McDonald's is a buy at today's prices. Click here now to read our premium research report on the company.

Click here to add Arcos Dorados to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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