What happened

Arcos Dorados (NYSE:ARCO) shareholders trailed the market by a wide margin last year. Their stock dropped 37% in 2020, compared to the 16% increase logged by the S&P 500, according to data provided by S&P Global Market Intelligence.

That drop also stacks up poorly against the 9% boost that McDonald's (NYSE:MCD) enjoyed for the year.

A woman takes a bite out of a burger.

Image source: Getty Images.

So what

McDonald's benefited from its more geographically diverse selling base, while Arcos Dorados' Latin American focus translated into weaker results. Sure, COVID-19 pressures lessened with each passing quarter. But Arcos Dorodas still reported a brutal 27% comparable-store sales drop in fiscal Q3. McDonald's, in contrast, announced a 2% global comps drop for the period.

Now what

CEO Marcelo Rabach and his team said in a November conference call that the fast-food chain still faces restrictions in its operating capacity due to COVID-19 containment measures. On the bright side, the delivery business is booming, and Arcos Dorados is back to generating positive cash flow. Still, management sounded cautious about the outlook for a quick rebound in 2021.

Investors should get clarity about that outlook when the chain holds its annual investor meeting on January 21. Executives promised a more detailed growth projection in that report, but Wall Street is bracing for a weak prediction, given the pressures on the fast-food industry in Latin America today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.