Arcos Dorados, the world's largest independent McDonald's franchisee with 2,548 restaurants across 21 Latin American and Caribbean territories, just printed the best quarter in its history. Second-quarter total revenues reached $1.31 billion, up 14.3% in US dollars and 18.5% in constant currency; adjusted EBITDA reached $126.8 million, up 15.2% as reported and 13.8% in constant currency, with margin expanding 70 basis points when the year-ago quarter is stripped of a one-off sub-franchisee gain; net income attributable to the company hit $45.0 million, or $0.22 per share, exactly doubling the year-ago $0.11. Six-month operating cash flow more than doubled to $123.5 million, and the company completed a clean-up of its balance sheet in July by redeeming every remaining 2029 senior note at par-plus, dropping net financial debt to 1.1x LTM adjusted EBITDA. The deleveraging is essentially done. The question now is whether the operating momentum - the best guest traffic in six quarters, digital channel sales up roughly 25% and now 66% of systemwide, the FIFA World Cup sponsorship tailwind, and adjusted free cash flow up roughly 9x on a last-twelve-months basis - translates into the next leg of the multiple.
The single most important sentence in the company's earnings release is the one Luis Raganato, the CEO, used to describe the quarter: "Adjusted EBITDA, net income and earnings per share all set second quarter records." The company does not publish forward guidance, but the second-quarter record, the H1 record, the deleveraging milestone, and the loyalty program crossing 34.3 million registered members are the four operational tests the market will measure against. The stock trades at roughly 7x trailing GAAP earnings and 9.7x the analyst-implied forward, against a sell-side target near $11.29 - a price that assumes the constant-currency momentum holds, Brazil's restaurant-economics recovery continues, and the World Cup tailwind extends into the second half without a consumer pullback in any of the three divisions.