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FEMSA (FMX) to Report Q4 Earnings: What's in the Offing?

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Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) or FEMSA is slated to report fourth-quarter 2020 results on Mar 1. The company is likely to register year-over-year bottom-line growth when it reports fourth-quarter fiscal 2020 results. The Zacks Consensus Estimate for the company’s fourth-quarter earnings of $1.17 per share suggests a 64.8% surge from the year-ago quarter’s reported figure. Also, the consensus mark has moved up 31.5% in the past 30 days.

Moreover, the consensus mark for quarterly revenues is pegged at $6.32 billion, indicating a decline of 8.9% from the figure reported in the year-ago quarter.

In the last reported quarter, the company’s bottom line missed estimates by 53.4%. However, it delivered an earnings surprise of 437.6%, on average, in the last four quarters.

Factors at Play

Despite the pandemic-led challenges, FEMSA’s gross margin has been benefiting from a positive sales mix effect due to the pandemic-led shift in consumer behavior, effective collaboration with key supplier partners across all operations; and better margin performance of its business in Ecuador. The company has also been exercising tight control over expenses and supply-chain operations to boost margins. The company’s gross margin and bottom line in the fourth quarter are likely to have gained from the persistence of the aforementioned trends as well as tight expense management.

Additionally, FEMSA continues to focus on offering customers more options to make contactless purchases by intensifying digital and technology-driven initiatives across operations. The company’s Coca-Cola FEMSA has been leading the way with its omnichannel business, while FEMSA Comercio has been progressing with the adoption of digital initiatives. Within its OXXO store chains, the company remained on track with investing in digital offerings, loyalty programs and fintech platforms throughout 2020, to evolve stronger after the pandemic. Gains from these digital investments are likely to get reflected in the company’s fourth-quarter top and bottom-line performance.

However, the company’s results are likely to have been marred by coronavirus-led impacts on operations across most segments. In fact, FEMSA Comercio’s Fuel Division has been most impacted by the pandemic-led challenges. The Fuel Division has been witnessing soft trends due to reduced mobility and social distancing, which led to lesser vehicle utilization. The effects of these are likely to get reflected in the Fuel Division’s results for the fourth quarter as well.

Further, the increase in operating expenses resulting from the ongoing initiatives to strengthen the compensation structure for store personnel as well as higher investments in IT programs and infrastructure are likely to have hurt operating income in the fourth quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an 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 #5 (Strong Sell) and an Earnings ESP of 0.00%.

Stocks Likely to Deliver Earnings Beat

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

Grocery Outlet Holding Corp. (GO - Free Report) presently has an Earnings ESP of +5.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Monster Beverage Corporation (MNST - Free Report) currently has an Earnings ESP of +1.70% and a Zacks Rank #3.

Ollie’s Bargain Outlet Holdings, Inc. (OLLI - Free Report) has an Earnings ESP of +3.73% and a Zacks Rank #3, at present.

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