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FEMSA (FMX) Benefits From Growth Initiatives: Stock to Gain
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Fomento Economico Mexicano S.A.B. de C.V. (FMX - Free Report) alias, FEMSA, has been in a good spot, courtesy of its robust strategic initiatives. FEMSA has been witnessing solid growth trends across all business units, owing to effective strategies and strong market demand. The company’s efforts to expand in the U.S. specialized distribution segment bode well.
FMX's digital initiatives, business expansion endeavors and continued strength in OXXO Mexico and OXXO Gas have also been aiding results. Moreover, it displays solid financial flexibility.
FEMSA’s adjusted net majority earnings per ADS benefited from robust sales growth, improved gross margin and lower interest expenses. On an organic basis, total revenues rose 4.3% year over year. Gains across its business units drove revenue growth.
Shares of this Zacks Rank #3 (Hold) company have rallied 35.1% in the past year compared with the industry’s growth of 5.1%. The sector witnessed a decline of 2.8% in the same time frame. Also, it came ahead of S&P 500’s 28.3% rise.
The Zacks Consensus Estimate for FMX’s current financial-year sales and earnings indicates growth of 4.2% and 0.9%, respectively, from the year-ago reported numbers.
However, it witnessed a decline in operating margin due to contraction at Proximity Americas, Health and Fuel divisions. This was on account of higher labor expenses related to labor reforms in Mexico and the inclusion of Proximity Europe.
Image Source: Zacks Investment Research
Factors Driving Growth
FMX has been gaining pace in the digital space through its tech and innovation business unit, Digital@FEMSA, which is focused on building a value-added digital and financial ecosystem for end customers and businesses. It also aims to enable and leverage the strategic assets of FEMSA’s core business verticals.
Its Coca-Cola FEMSA is leading the way with its omni-channel business, while the Proximity division is progressing with the adoption of digital initiatives for OXXO stores. Within its OXXO store chains, the company is on track with investing in digital offerings, loyalty programs and fintech platforms to evolve stronger over the long term.
Its OXXO digital wallet, OXXO Premia, and loyalty program have been performing well. The company made progress on its digital efforts, with continued addition of Spin Premia and Spin by OXXO customers at an accelerated pace. Spin by OXXO received its definitive authorization to operate as a fintech in Mexico. Spin by OXXO reached 6.9 million active users in fourth-quarter 2023, while Spin Premia had 19.3 million active loyalty users with an average tender of 31.0%.
FEMSA has been on track with its strategy of creating a national distribution platform in the United States through the expansion of footprint in the specialized distribution industry. Through its Envoy Solutions subsidiary, the company has expanded in the specialized distribution industry with significant acquisitions completed in 2022, including OK Market in Chile; ATRA Janitorial Supply Co., Inc. in the United States and Sigma Supply of North America Inc., based in Hot Springs, AR.
FMX’s venture in the specialized distribution industry relates to its plan of investing in adjacent businesses, which can leverage capabilities across different markets, providing an opportunity for attractive growth and risk-adjusted returns. With the presence of OXXO business and other retail operations, it has become an expert in the organization and management of supply chains and distribution systems. Notably, it serves large numbers of businesses and retail customers through millions of interactions in different industries.
Hurdles on the Path
FEMSA has been witnessing weak operating margins for a while now. During fourth-quarter 2023, operating income (income from operations) was down 1.4% year over year, and on an organic basis, the metric dipped 0.7%.
The consolidated operating margin contracted 60 bps to 9.2% in the reported quarter due to margin contractions at the Coca-Cola FEMSA, Proximity Americas and Health divisions. This was partly offset by margin expansions at the Fuel and Proximity Europe divisions. In the previous quarter, the consolidated operating margin contracted 50 bps year over year to 8.5%.
Key Picks
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Vita Coco Company (COCO - Free Report) , Molson Coors (TAP - Free Report) and Diageo (DEO - Free Report) .
Vita Coco, which develops, markets and distributes coconut water products in the United States, Canada, Europe, the Middle East and the Asia Pacific, currently sports a Zacks Rank #1 (Strong Buy). COCO's shares have rallied 23.9% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vita Coco’s current financial year’s sales and earnings per share indicates growth of 1.8% and 24.3%, respectively, from the year-ago reported figures. COCO has a trailing four-quarter earnings surprise of 31.3%, on average.
Molson Coors is a global manufacturer and seller of beer and other beverage products, with an impressive diverse portfolio of owned and partner brands. It has a trailing four-quarter negative earnings surprise of 37.2%, on average. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Molson Coors’ current financial-year sales and earnings suggests growth of 1.4% and 4.2%, respectively, from the prior-year reported levels. TAP's shares have risen 31.3% in the past year.
Diageo is involved in producing, distilling, brewing, bottling, packaging as well as distributing spirits, wine and beer. It currently carries a Zacks Rank #2. DEO's shares have lost 18.6% in the past year.
The Zacks Consensus Estimate for DEO’s current financial-year sales implies growth of 5.6% from the year-earlier actuals.
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FEMSA (FMX) Benefits From Growth Initiatives: Stock to Gain
Fomento Economico Mexicano S.A.B. de C.V. (FMX - Free Report) alias, FEMSA, has been in a good spot, courtesy of its robust strategic initiatives. FEMSA has been witnessing solid growth trends across all business units, owing to effective strategies and strong market demand. The company’s efforts to expand in the U.S. specialized distribution segment bode well.
FMX's digital initiatives, business expansion endeavors and continued strength in OXXO Mexico and OXXO Gas have also been aiding results. Moreover, it displays solid financial flexibility.
FEMSA’s adjusted net majority earnings per ADS benefited from robust sales growth, improved gross margin and lower interest expenses. On an organic basis, total revenues rose 4.3% year over year. Gains across its business units drove revenue growth.
Shares of this Zacks Rank #3 (Hold) company have rallied 35.1% in the past year compared with the industry’s growth of 5.1%. The sector witnessed a decline of 2.8% in the same time frame. Also, it came ahead of S&P 500’s 28.3% rise.
The Zacks Consensus Estimate for FMX’s current financial-year sales and earnings indicates growth of 4.2% and 0.9%, respectively, from the year-ago reported numbers.
However, it witnessed a decline in operating margin due to contraction at Proximity Americas, Health and Fuel divisions. This was on account of higher labor expenses related to labor reforms in Mexico and the inclusion of Proximity Europe.
Image Source: Zacks Investment Research
Factors Driving Growth
FMX has been gaining pace in the digital space through its tech and innovation business unit, Digital@FEMSA, which is focused on building a value-added digital and financial ecosystem for end customers and businesses. It also aims to enable and leverage the strategic assets of FEMSA’s core business verticals.
Its Coca-Cola FEMSA is leading the way with its omni-channel business, while the Proximity division is progressing with the adoption of digital initiatives for OXXO stores. Within its OXXO store chains, the company is on track with investing in digital offerings, loyalty programs and fintech platforms to evolve stronger over the long term.
Its OXXO digital wallet, OXXO Premia, and loyalty program have been performing well. The company made progress on its digital efforts, with continued addition of Spin Premia and Spin by OXXO customers at an accelerated pace. Spin by OXXO received its definitive authorization to operate as a fintech in Mexico. Spin by OXXO reached 6.9 million active users in fourth-quarter 2023, while Spin Premia had 19.3 million active loyalty users with an average tender of 31.0%.
FEMSA has been on track with its strategy of creating a national distribution platform in the United States through the expansion of footprint in the specialized distribution industry. Through its Envoy Solutions subsidiary, the company has expanded in the specialized distribution industry with significant acquisitions completed in 2022, including OK Market in Chile; ATRA Janitorial Supply Co., Inc. in the United States and Sigma Supply of North America Inc., based in Hot Springs, AR.
FMX’s venture in the specialized distribution industry relates to its plan of investing in adjacent businesses, which can leverage capabilities across different markets, providing an opportunity for attractive growth and risk-adjusted returns. With the presence of OXXO business and other retail operations, it has become an expert in the organization and management of supply chains and distribution systems. Notably, it serves large numbers of businesses and retail customers through millions of interactions in different industries.
Hurdles on the Path
FEMSA has been witnessing weak operating margins for a while now. During fourth-quarter 2023, operating income (income from operations) was down 1.4% year over year, and on an organic basis, the metric dipped 0.7%.
The consolidated operating margin contracted 60 bps to 9.2% in the reported quarter due to margin contractions at the Coca-Cola FEMSA, Proximity Americas and Health divisions. This was partly offset by margin expansions at the Fuel and Proximity Europe divisions. In the previous quarter, the consolidated operating margin contracted 50 bps year over year to 8.5%.
Key Picks
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Vita Coco Company (COCO - Free Report) , Molson Coors (TAP - Free Report) and Diageo (DEO - Free Report) .
Vita Coco, which develops, markets and distributes coconut water products in the United States, Canada, Europe, the Middle East and the Asia Pacific, currently sports a Zacks Rank #1 (Strong Buy). COCO's shares have rallied 23.9% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vita Coco’s current financial year’s sales and earnings per share indicates growth of 1.8% and 24.3%, respectively, from the year-ago reported figures. COCO has a trailing four-quarter earnings surprise of 31.3%, on average.
Molson Coors is a global manufacturer and seller of beer and other beverage products, with an impressive diverse portfolio of owned and partner brands. It has a trailing four-quarter negative earnings surprise of 37.2%, on average. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Molson Coors’ current financial-year sales and earnings suggests growth of 1.4% and 4.2%, respectively, from the prior-year reported levels. TAP's shares have risen 31.3% in the past year.
Diageo is involved in producing, distilling, brewing, bottling, packaging as well as distributing spirits, wine and beer. It currently carries a Zacks Rank #2. DEO's shares have lost 18.6% in the past year.
The Zacks Consensus Estimate for DEO’s current financial-year sales implies growth of 5.6% from the year-earlier actuals.