Fomento Económico Mexicano, S.A.B de C.V. (FMX Quick QuoteFMX - Free Report) , also known as FEMSA, is slated to report second-quarter 2016 results on Jul 27. Last quarter, the company delivered earnings in line with our estimates.

However, the leading Latin American beverage company delivered negative earnings surprises in three out of the last four quarters, with an average negative surprise of 11.11%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

FEMSA is on track to drive growth through its strategic measures, which include increasing store count, diversifying business portfolio and focusing on core business activities. We believe the company is well positioned to gain from its venture in the drugstore business, as marked by its recent acquisitions in this line of business.

Currently, this business contributes about 10% to FEMSA’s total revenues. In fact, considering the importance of its drugstore operations, management also split the reporting divisions of FEMSA Comercio into three – Fuel, Health and Retail for enhanced presentation and clarity.

While these factors bode well for FEMSA’s growth, the company continues to struggle with adverse currency fluctuations, which have been weighing on Coca-Cola FEMSA's results for a while now. Also, soft Heineken performance has been a hurdle in the past two quarters, affecting the company’s results.

Additionally, it has been witnessing pressurized margins owing to growth and incorporation of lower-margin businesses in FEMSA Comercio’s Health and Fuel divisions. Together, these factors make us slightly cautious of the upcoming results.

Earnings Whispers

Our proven model does not conclusively show that FEMSA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for FEMSA is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 66 cents.

Zacks Rank: FEMSA carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Amazon.com Inc. (AMZN Quick QuoteAMZN - Free Report) , scheduled to report earnings on Jul 28, has an Earnings ESP of +37.72% and a Zacks Rank #2 (Buy).

Cabela's Inc. , scheduled to report earnings on Jul 28, has an Earnings ESP of +4.92% and a Zacks Rank #2.

Papa John's International Inc. (PZZA Quick QuotePZZA - Free Report) , expected to report earnings on Aug 2, has an Earnings ESP of +3.70% and a Zacks Rank #2.

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