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Here's Why FEMSA (FMX) is Marching Ahead of Its Industry
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FEMSA (FMX - Free Report) has been benefiting from growth across all business units, solid online show and continued strength at OXXO Mexico, as well as OXXO Gas. It has been on track with its strategy of creating a distribution platform in the United States through the expansion of its footprint in the specialized distribution industry.
This led to robust fourth-quarter 2022 sales. Total revenues were $9,476 million (Ps. 186,467 million), which improved 23% year over year in the local currency. On an organic basis, total revenues rose 13.5%, driven by strength at OXXO Mexico, stemming from solid traffic that led to a double-digit same-store sales increase.
Backed by the solid fourth-quarter performance, this Zacks Rank #3 (Hold) company’s shares have rallied 21.5% in the past three months against the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
Let’s take a look at the factors positioning FEMSA for growth.
Factors Driving the Stock
The company 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 is leading the way with its omni-channel business, while FEMSA Comercio is progressing with the adoption of digital initiatives.
Within its OXXO store chains, the company is on track with investing in digital offerings, loyalty programs and fintech platforms to boost its strength after the pandemic and over the long term. Its OXXO digital wallet, OXXO Premia and loyalty program have been performing well. In the fourth quarter, the company made progress on its digital efforts, with the continued addition of OXXO Premia and Spin by OXXO customers at an accelerated pace.
It has been on track with its strategy of creating a national distribution platform in the United States through the expansion of its footprint in the specialized distribution industry. The company’s venture in the specialized distribution industry aligns with its plan of investing in adjacent businesses that can leverage capabilities across different markets, providing an opportunity for attractive growth and risk-adjusted returns.
With the presence of its OXXO business and other retail operations, the company has become an expert in the organization and management of supply chains and distribution systems. Notably, FEMSA serves large numbers of businesses and retail customers through millions of interactions in different industries. The recent transactions are likely to complement its investments in WAXIE Sanitary Supply and North American Corporation in March 2020. This marked the company’s entry into the U.S. specialized distribution industry, which covers a wide variety of sectors, including fresh and frozen products, decoration, DIY, office supplies, furniture and stock clearance.
Hurdles on the Path
FEMSA has been witnessing the impacts of supply-chain disruptions and higher raw material costs. The company witnessed a margin decline in fourth-quarter 2022. The company’s consolidated gross margin contracted 60 basis points to 38.9%, owing to the gross margin contraction across all its business units.
As a result, it reported net majority earnings per ADS of $0.69 (Ps. 1.35 per FEMSA unit) in fourth-quarter 2022. Net consolidated income was Ps. 8,838 million, reflecting a decline of 12.5% from Ps. 10,100 million in the year-ago quarter.
Bottom Line
We believe that FEMSA is well-poised for growth in the long term, backed by its online strength, as well as expansion and growth plans.
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the year-ago reported figures.
Vital Farms, which provides pasture-raised products, currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 53.3%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales suggests an increase of 25.4% from the year-ago reported number.
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Here's Why FEMSA (FMX) is Marching Ahead of Its Industry
FEMSA (FMX - Free Report) has been benefiting from growth across all business units, solid online show and continued strength at OXXO Mexico, as well as OXXO Gas. It has been on track with its strategy of creating a distribution platform in the United States through the expansion of its footprint in the specialized distribution industry.
This led to robust fourth-quarter 2022 sales. Total revenues were $9,476 million (Ps. 186,467 million), which improved 23% year over year in the local currency. On an organic basis, total revenues rose 13.5%, driven by strength at OXXO Mexico, stemming from solid traffic that led to a double-digit same-store sales increase.
Backed by the solid fourth-quarter performance, this Zacks Rank #3 (Hold) company’s shares have rallied 21.5% in the past three months against the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
Let’s take a look at the factors positioning FEMSA for growth.
Factors Driving the Stock
The company 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 is leading the way with its omni-channel business, while FEMSA Comercio is progressing with the adoption of digital initiatives.
Within its OXXO store chains, the company is on track with investing in digital offerings, loyalty programs and fintech platforms to boost its strength after the pandemic and over the long term. Its OXXO digital wallet, OXXO Premia and loyalty program have been performing well. In the fourth quarter, the company made progress on its digital efforts, with the continued addition of OXXO Premia and Spin by OXXO customers at an accelerated pace.
It has been on track with its strategy of creating a national distribution platform in the United States through the expansion of its footprint in the specialized distribution industry. The company’s venture in the specialized distribution industry aligns with its plan of investing in adjacent businesses that can leverage capabilities across different markets, providing an opportunity for attractive growth and risk-adjusted returns.
With the presence of its OXXO business and other retail operations, the company has become an expert in the organization and management of supply chains and distribution systems. Notably, FEMSA serves large numbers of businesses and retail customers through millions of interactions in different industries. The recent transactions are likely to complement its investments in WAXIE Sanitary Supply and North American Corporation in March 2020. This marked the company’s entry into the U.S. specialized distribution industry, which covers a wide variety of sectors, including fresh and frozen products, decoration, DIY, office supplies, furniture and stock clearance.
Hurdles on the Path
FEMSA has been witnessing the impacts of supply-chain disruptions and higher raw material costs. The company witnessed a margin decline in fourth-quarter 2022. The company’s consolidated gross margin contracted 60 basis points to 38.9%, owing to the gross margin contraction across all its business units.
As a result, it reported net majority earnings per ADS of $0.69 (Ps. 1.35 per FEMSA unit) in fourth-quarter 2022. Net consolidated income was Ps. 8,838 million, reflecting a decline of 12.5% from Ps. 10,100 million in the year-ago quarter.
Bottom Line
We believe that FEMSA is well-poised for growth in the long term, backed by its online strength, as well as expansion and growth plans.
Consumer Staple Stocks Worth a Look
Some better-ranked food stocks are Post Holdings (POST - Free Report) , General Mills (GIS - Free Report) and Vital Farms (VITL - Free Report) .
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the year-ago reported figures.
Vital Farms, which provides pasture-raised products, currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 53.3%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales suggests an increase of 25.4% from the year-ago reported number.