Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) or FEMSA is slated to report first-quarter 2019 results on Apr 29.
The company has a dismal earnings surprise trend, having missed estimates in seven of the trailing 10 quarters. Also, it witnessed average four-quarter negative earnings surprise of 34%. Further, sales missed estimates in fourth-quarter 2018, which marked a sales lag after two straight quarters of recording a beat.
Factors Likely to Impact Q1
FEMSA has been delivering soft operating margins over the past few quarters. Declines in the margins at Coca-Cola FEMSA and FEMSA Comercio’s Fuel Division mainly hurt operating margin in fourth-quarter 2018. Notably, margins at the Fuel division were impacted by higher wages, provisions associated with some profitable institutional clients, increased marketing efforts, and escalated remodeling and installation expenses. Persistence of these headwinds may continue to impact margins in the first quarter of 2019.
Although operating margin at Proximity Division remained flat in the fourth quarter, management expects the segment’s margins to remain slightly pressurized in 2019 due to the acceleration in store-growth efforts in South America.
Additionally, FEMSA remains prone to rising raw material costs that have plagued the beverage industry. Higher tariff on steel and aluminum by the Trump administration has led to an increase in costs for producing cans and packaging, which can deter the company’s top line and margins. Further, escalating industry-wide freight costs and increase in other input costs, which is impacting the bottling system and some of the finished products, is concerning investors. This may impact the company’s top and bottom-line performances in the to-be-reported quarter.
The company earlier notified about macroeconomic uncertainty that is likely to prevail in many of the markets, including Mexico and Brazil in the months ahead.
Nevertheless, FEMSA’s efforts to expand the store base, diversify the business portfolio and focus on the core business activities might offset some of the declines due to aforementioned headwinds. The company has been taking actions to diversify the product portfolio while expanding the small-box retail segment, particularly across Latin America. This should boost top-line performance in the to-be-reported quarter.
What the Zacks Model Unveils
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 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
FEMSA currently has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%. The company’s negative Rank and Earnings ESP of 0.00% makes surprise prediction impossible.
We caution against stocks with a Zacks Ranks #4 (Sell) or 5 going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks Likely to Deliver Earnings Beat
Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
The Estee Lauder Companies Inc. (EL - Free Report) has an Earnings ESP of +1.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. (AMZN - Free Report) has an Earnings ESP of +10.65% and a Zacks Rank of 2.
Altria Group, Inc. (MO - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank #3.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) or FEMSA is slated to report first-quarter 2019 results on Apr 29.
The company has a dismal earnings surprise trend, having missed estimates in seven of the trailing 10 quarters. Also, it witnessed average four-quarter negative earnings surprise of 34%. Further, sales missed estimates in fourth-quarter 2018, which marked a sales lag after two straight quarters of recording a beat.
Factors Likely to Impact Q1
FEMSA has been delivering soft operating margins over the past few quarters. Declines in the margins at Coca-Cola FEMSA and FEMSA Comercio’s Fuel Division mainly hurt operating margin in fourth-quarter 2018. Notably, margins at the Fuel division were impacted by higher wages, provisions associated with some profitable institutional clients, increased marketing efforts, and escalated remodeling and installation expenses. Persistence of these headwinds may continue to impact margins in the first quarter of 2019.
Although operating margin at Proximity Division remained flat in the fourth quarter, management expects the segment’s margins to remain slightly pressurized in 2019 due to the acceleration in store-growth efforts in South America.
Additionally, FEMSA remains prone to rising raw material costs that have plagued the beverage industry. Higher tariff on steel and aluminum by the Trump administration has led to an increase in costs for producing cans and packaging, which can deter the company’s top line and margins. Further, escalating industry-wide freight costs and increase in other input costs, which is impacting the bottling system and some of the finished products, is concerning investors. This may impact the company’s top and bottom-line performances in the to-be-reported quarter.
The company earlier notified about macroeconomic uncertainty that is likely to prevail in many of the markets, including Mexico and Brazil in the months ahead.
Nevertheless, FEMSA’s efforts to expand the store base, diversify the business portfolio and focus on the core business activities might offset some of the declines due to aforementioned headwinds. The company has been taking actions to diversify the product portfolio while expanding the small-box retail segment, particularly across Latin America. This should boost top-line performance in the to-be-reported quarter.
What the Zacks Model Unveils
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 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
FEMSA currently has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%. The company’s negative Rank and Earnings ESP of 0.00% makes surprise prediction impossible.
We caution against stocks with a Zacks Ranks #4 (Sell) or 5 going into an earnings announcement, especially when the company is seeing a negative estimate revision.
Stocks Likely to Deliver Earnings Beat
Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
The Estee Lauder Companies Inc. (EL - Free Report) has an Earnings ESP of +1.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. (AMZN - Free Report) has an Earnings ESP of +10.65% and a Zacks Rank of 2.
Altria Group, Inc. (MO - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank #3.
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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