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Here's How FEMSA (FMX) is Placed Ahead of Earnings in Q4

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Fomento Economico Mexicano, S.A.B. de C.V. FMX or FEMSA is slated to report fourth-quarter 2019 results on Feb 27.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.18, implying an 11.3% decline from the year-earlier quarter's reported figure. Notably, the consensus mark has been unchanged over the past 30 days.

Key Factors to Note

FEMSA’s top line has been benefiting from growth across all segments. The FEMSA Comercio’s Proximity, Health and Fuel divisions have been witnessing gains from store openings, steady growth in Mexico, strong international operations, robust pricing and progress in the integration of Corporación GPF in Ecuador. Robust pricing, revenue-management initiatives and volume growth across regions have been aiding the performance of the Coca-Cola FEMSA division.

The company’s growth via acquisition strategy has been reaping benefits. The recent acquisitions of minority stake in Jetro Restaurant Depot, AGV and 40% stake in Grupo Socofar as well as a joint venture with Raízen reveal its commitment to invest in the expansion of core businesses. Gains from these acquisitions are likely to get reflected in its fourth-quarter results.

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However, soft margins across some segments have been concerning the company. Operating margins at FEMSA Comercio’s Health and Proximity Divisions in third-quarter 2019 were hurt by operating expense deleverage in the units, which is likely to have continued in the fourth quarter. Tariff-related and higher input costs have been hurting its bottling unit.

Zacks Model

Our proven model does not conclusively predict earnings beat for FEMSAA 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 #4 and Earnings ESP of 0.00%.

Stocks Likely to Deliver Earnings Beat

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

Coca Cola Femsa S.A.B. de C.V. KOF presently has an Earnings ESP of +5.47% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Limoneira Co LMNR currently has an Earnings ESP of +2.70% and a Zacks Rank #3.

Freshpet, Inc. FRPT has an Earnings ESP of +17.65% and a Zacks Rank #3 at present.

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