What happened
Arcos Dorados (ARCO 1.13%) shareholders trounced the market on Wednesday morning. The fast-food restaurant operator's stock jumped 11% before settling to an 8% gain by 11:30 am, EDT, compared to a slight decline in the S&P 500.
The rally was sparked by a Wall Street pro who turned more confident about the McDonald's (MCD -0.33%) franchisee's business.
So what
Arcos Dorados stock was hit with an upgrade from an analyst at Credit Suisse, who thinks the stock could surge to $9.50 per share over the short term as the Latin American fast-food industry moves out of the pandemic.
Image source: Getty Images.
That target implies market-trouncing gains from the $7.20-per-share mark that shares were trading at before the news. It also suggests Arcos Dorados is primed to roughly double since late 2021.
Now what
That rebound will depend on how well the business does over the next few quarters. Arcos Dorados said in late January that sales trends were strong through the end of 2021. Management is doubling down on growth, too, by planning accelerated store launches and remodels over the next two years. "We begin the 2022 to 2024 growth cycle excited about the direction of the business," CEO Marcelo Rabach said in a press release.
Investors will judge those encouraging words against Arcos Dorados' actual Q4 results and 2022 outlook, which it will publish on March 16.
Watch for signs in that report that the franchisee is following in McDonald's footsteps by winning higher customer traffic as the region emerges from the latest omicron variant surge.
The chain likely set an earnings record in Q4, too, thanks to a more streamlined menu, higher prices, and more demand for premium sandwiches and beverages. Continued wins on these fronts are the surest path to higher returns for investors over the long term.
