We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's What Makes FEMSA (FMX) a Good Investment Choice Now
Read MoreHide Full Article
Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) , alias FEMSA, regained momentum in the past month driven by strategic actions, including expanding store base, diversifying business portfolio and focus on core business activities. This makes FEMSA a good investment choice as the stock continues the uptick.
However, we cannot ignore the near-term headwinds that may bother the stock’s growth. These mainly include the dismal top- and bottom-line trends as well as the continued decline in margins. Let’s analyze why we should retain the stock at this time.
Strategic Actions – Business Diversification
FEMSA has been taking prudent steps to diversify the product portfolio while expanding in the small-box retail segment, which bodes well for future operating performance. In an attempt to strengthen its retail portfolio, the company acquired Santiago-based grocer Big John, which is likely to enhance FEMSA Comercio’s convenience store operations in Chile.
FEMSA has been focusing on achieving growth via acquisitions for a while now. Earlier, it spread footprint in South America through the Grupo Socofar buyout, which not only widened its exposure in the drugstore business but also brought beauty operations under ambit. Additionally, the company has been diversifying retail-chain format operations by acquiring businesses across Latin America. FEMSA Comercio considerably extended footprint in the small-format retail chains in Mexico, Chile and Colombia.
Health Unit to Back growth
FEMSA has been focusing on expanding drugstore operations as it sees significant potential in that space. The company has been aggressively seeking to capitalize on the growing drugstore business. As of Dec 31, 2017, it had total 2,225 point of sales across all regions, of which, 47 net new stores were added during the fourth quarter. Further, FEMSA is on track to build infrastructure and integrate its four legacy drugstore operations, including Farmacias YZA, Farmacias FM Moderna and Farmacias Farmacón as well as Grupo Socofar, into a single operating platform. We believe, FEMSA’s venture into the drugstore business strategically fits its chain-store business and will be accretive to both top and bottom lines in the long term.
Healthy Financials
Moreover, FEMSA's strong cash flow generation capacity and a healthy balance sheet enable it to make incremental investments in business expansion. The company is effectively utilizing available funds to grow core bottling and convenience store operations while expanding organic and inorganic businesses.
Solid Business Portfolio
FEMSA is a leading company with exposure in various industries, including beverage, beer and retail, which give it an edge over competitors. The company mainly gains exposure in the beverage industry through Coca-Cola FEMSA S.A.B. de C.V. (KOF - Free Report) , which operates as world’s largest franchise bottler for Coca-Cola (KO - Free Report) products. In the beer industry, it enjoys a notable position by owning 14.76% in Heineken (HEINY - Free Report) , a leading brewer with operations in 70 countries.
Moreover, FEMSA’s share in the retail space relate to the operation of various small-format store chains, including OXXO, through FEMSA Comercio subsidiary. Apart from these, through FEMSA Strategic Businesses subsidiary, FEMSA provides logistics, point-of-sale refrigeration solutions and plastics solutions to its business units and third-party clients.
Near-Term Hurdles
Though the company’s long-term growth prospects remain intact, its negative surprise history remains a hurdle. It posted lower-than-expected earnings and sales for fourth-quarter 2017, which marked fifth negative earnings surprise in the trailing six quarters. Moreover, revenues lagged estimates in three of the last four quarters. Results were hurt by the change in the accounting method for Coca-Cola FEMSA’s Venezuelan operation. Further, the company has been witnessing strained margins due to higher operating expenses at Coca-Cola FEMSA and FEMSA Comercio’s Retail division. We believe that persistence of these headwinds can be troublesome for the stock.
Fomento Economico Mexicano S.A.B. de C.V. Price, Consensus and EPS Surprise
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
Here's What Makes FEMSA (FMX) a Good Investment Choice Now
Fomento Economico Mexicano, S.A.B. de C.V. (FMX - Free Report) , alias FEMSA, regained momentum in the past month driven by strategic actions, including expanding store base, diversifying business portfolio and focus on core business activities. This makes FEMSA a good investment choice as the stock continues the uptick.
Notably, this Zacks Rank #3 (Hold) stock surged 10.6% in the past month, outperforming the industry’s growth of 1.6%. This indicates a positive sentiment on the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, we cannot ignore the near-term headwinds that may bother the stock’s growth. These mainly include the dismal top- and bottom-line trends as well as the continued decline in margins. Let’s analyze why we should retain the stock at this time.
Strategic Actions – Business Diversification
FEMSA has been taking prudent steps to diversify the product portfolio while expanding in the small-box retail segment, which bodes well for future operating performance. In an attempt to strengthen its retail portfolio, the company acquired Santiago-based grocer Big John, which is likely to enhance FEMSA Comercio’s convenience store operations in Chile.
FEMSA has been focusing on achieving growth via acquisitions for a while now. Earlier, it spread footprint in South America through the Grupo Socofar buyout, which not only widened its exposure in the drugstore business but also brought beauty operations under ambit. Additionally, the company has been diversifying retail-chain format operations by acquiring businesses across Latin America. FEMSA Comercio considerably extended footprint in the small-format retail chains in Mexico, Chile and Colombia.
Health Unit to Back growth
FEMSA has been focusing on expanding drugstore operations as it sees significant potential in that space. The company has been aggressively seeking to capitalize on the growing drugstore business. As of Dec 31, 2017, it had total 2,225 point of sales across all regions, of which, 47 net new stores were added during the fourth quarter. Further, FEMSA is on track to build infrastructure and integrate its four legacy drugstore operations, including Farmacias YZA, Farmacias FM Moderna and Farmacias Farmacón as well as Grupo Socofar, into a single operating platform. We believe, FEMSA’s venture into the drugstore business strategically fits its chain-store business and will be accretive to both top and bottom lines in the long term.
Healthy Financials
Moreover, FEMSA's strong cash flow generation capacity and a healthy balance sheet enable it to make incremental investments in business expansion. The company is effectively utilizing available funds to grow core bottling and convenience store operations while expanding organic and inorganic businesses.
Solid Business Portfolio
FEMSA is a leading company with exposure in various industries, including beverage, beer and retail, which give it an edge over competitors. The company mainly gains exposure in the beverage industry through Coca-Cola FEMSA S.A.B. de C.V. (KOF - Free Report) , which operates as world’s largest franchise bottler for Coca-Cola (KO - Free Report) products. In the beer industry, it enjoys a notable position by owning 14.76% in Heineken (HEINY - Free Report) , a leading brewer with operations in 70 countries.
Moreover, FEMSA’s share in the retail space relate to the operation of various small-format store chains, including OXXO, through FEMSA Comercio subsidiary. Apart from these, through FEMSA Strategic Businesses subsidiary, FEMSA provides logistics, point-of-sale refrigeration solutions and plastics solutions to its business units and third-party clients.
Near-Term Hurdles
Though the company’s long-term growth prospects remain intact, its negative surprise history remains a hurdle. It posted lower-than-expected earnings and sales for fourth-quarter 2017, which marked fifth negative earnings surprise in the trailing six quarters. Moreover, revenues lagged estimates in three of the last four quarters. Results were hurt by the change in the accounting method for Coca-Cola FEMSA’s Venezuelan operation. Further, the company has been witnessing strained margins due to higher operating expenses at Coca-Cola FEMSA and FEMSA Comercio’s Retail division. We believe that persistence of these headwinds can be troublesome for the stock.
Fomento Economico Mexicano S.A.B. de C.V. Price, Consensus and EPS Surprise
Fomento Economico Mexicano S.A.B. de C.V. Price, Consensus and EPS Surprise | Fomento Economico Mexicano S.A.B. de C.V. Quote
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>