Arcos Dorados Holdings Inc. (NYSE:ARCO) Analysts Just Cut Their EPS Forecasts
Today is shaping up negative for Arcos Dorados Holdings Inc. (NYSE:ARCO) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Arcos Dorados Holdings' four analysts is for revenues of US$2.1b in 2020, which would reflect a sizeable 28% decline in sales compared to the last year of performance. After this downgrade, the company is anticipated to report a loss of US$0.098 in 2020, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of US$3.1b and earnings per share (EPS) of US$0.41 in 2020. So we can see that the consensus has become notably more bearish on Arcos Dorados Holdings' outlook with these numbers, making a sizeable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
View our latest analysis for Arcos Dorados Holdings
The consensus price target fell 20% to US$7.80, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Arcos Dorados Holdings, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$6.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past five years, revenues have declined around 1.8% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 28% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 8.7% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Arcos Dorados Holdings to suffer worse than the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Arcos Dorados Holdings dropped from profits to a loss this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Arcos Dorados Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Arcos Dorados Holdings.
There might be good reason for analyst bearishness towards Arcos Dorados Holdings, like a weak balance sheet. For more information, you can click here to discover this and the 3 other risks we've identified.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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