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Here's What You Should Know Ahead of FEMSA's (FMX) Q3 Earnings

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Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) or FEMSA is slated to report third-quarter 2020 results on Oct 29. The company significantly missed bottom-line estimates in the last reported quarter. It reported a loss per share of $1.03 compared with the Zacks Consensus Estimate of a loss of 11 cents.

The Zacks Consensus Estimate for the company’s third-quarter earnings of 92 cents has been unchanged over the past 30 days. The estimate suggests a 5.2% decline from the year-ago quarter’s reported figure.

Factors at Play

The coronavirus outbreak has been hurting FEMSA’s performance across most segments. While most of the company’s operations are deemed as essential, with drugstores and fuel services being operational, the effects of the restrictions are likely to have resulted in reduced traffic trends in the third quarter.

Its health division has been witnessing a strong demand for its products, while restrictions on consumer mobility, particularly in the major South American markets, are expected to have hurt sales in the third quarter. Its fuel division has been drastically hurt by a fall in vehicle utilization. The company’s OXXO stores have been witnessing softness due to the lack of consumer mobility, which is anticipated to have hurt sales in most categories and occasions.

Moreover, FEMSA is expected to have witnessed an operating margin decline in the third quarter, owing to operating deleverage as well as higher operating expenses.

However, the Coca-Cola FEMSA business has been partly resilient as it has been leveraging its large off-premise customers and flexible commercial platforms to meet consumer demand and minimize the negative impact of the pandemic. Additionally, the company’s consolidated gross margin is expected to have gained from a mix shift, efficient collaboration with supplier partners and better margins in Ecuador.

Also, its third-quarter performance is expected to have benefited from digital initiatives focused on offering customers more options to make more contactless purchases by intensifying digital and technology-driven initiatives across operations. Notably, Coca-Cola FEMSA has been leading the way with its omni-channel business, while FEMSA Comercio has been progressing with the adoption of digital initiatives.

What the Zacks Model Unveils

Our proven model does not conclusively predict earnings beat for FEMSA this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FEMSA carries a Zacks Rank #4 (Sell) and Earnings ESP of 0.00%.

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:

Nu Skin Enterprises, Inc. (NUS - Free Report) presently has an Earnings ESP of +3.54% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Newell Brands Inc. (NWL - Free Report) currently has an Earnings ESP of +0.33% and a Zacks Rank #2.

Altria Group, Inc. (MO - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #3 at present.

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