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Can FEMSA (FMX) Surprise This Earnings Season?

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Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) , also known as FEMSA, is set to report first-quarter 2014 results on Apr 30. Last quarter, it posted a negative surprise of 47.8%. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

FEMSA posted lower-than-expected bottom-line results for the fourth quarter of 2013. The company’s net majority income fell 49.5% year over year due to rise in cost of sales and operating expenses, fall in Heineken’s fourth-quarter 2013 net income in which FEMSA has a 20% participation interest and increased financing expenses resulting from the recently issued bonds by Coca-Cola FEMSA and FEMSA Comercio.

Earnings Whispers?

Our proven model does not conclusively project FEMSA as likely to beat earnings this quarter. A stock needs to have both positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:

Zacks ESP: ESP for FEMSA is 0.00% since the Most Accurate Estimate stands at 51 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks #3 Rank (Hold): FEMSA’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into earnings announcement, especially when the company is undergoing negative estimate revisions.

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