Arcos Dorados: Stronger earnings momentum, improved capital efficiency, focus on FCF

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Arcos Dorados: Stronger earnings momentum, improved capital efficiency, focus on FCF

ves and value platforms have driven a

sequential recovery, following a challenging 2025.

Brazil restaurants sales growth (% yoy)

Digital Ecosystem and Store Formats Supporting Growth. The continued expansion of digital

channels and optimized store formats remains a key structural driver. Digital sales now exceed

60% of revenues, supported by a large and growing loyalty base, enhancing customer engagement

and frequency. The shift toward stand-alone formats (drive-thru and delivery-focused units) is

improving sales mix and returns, while delivery (~20% of sales) and drive-thru (~25%) channels

provide incremental ticket growth and diversification of revenue streams.

Margins Supported by Cost Discipline and Pricing Execution. Balancing traffic protection with .Source: Abrasel-Stone, Jefferies

margin recovery, particularly in the context of food inflation (notably beef) combines selective price

increases, cost control and mix optimization, with each country managing pricing independently.

We expect a gradual margin recovery across regions, supported by easing cost pressures, stronger

execution and improved operating leverage.

Focus on Cash Generation. Arcos Dorados is evolving into a more resilient, cash-generative

business with improving profitability, disciplined growth and stronger capital allocation. With

continued share gains, a robust digital ecosystem and a focus on returns rather than expansion

pace, Arcos is well positioned to deliver sustainable earnings growth and higher ROIC, supporting

multiple expansion. Arcos trades at an attractive 9.7x 2027E PER, 4.0x EV/EBITDA, significantly

Pedro Baptista * | Equity Analystbelow historical av. (c6x NTM EV/EBITDA).