Yahoo Finance FEMSA (FMX) Earnings Miss Estimates in Q2, Revenues Beat
Fomento Economico Mexicano S.A.B. de C.V’s FMX, alias FEMSA, reported net majority earnings per ADS of 72 cents (Ps. 1.46 per FEMSA unit) in second-quarter 2022, missing the Zacks Consensus Estimate of $1.04.
Net consolidated income was Ps. 7,640 million (US$381.2 million), reflecting an increase of 45.4% from Ps. 5,255 million (US$262.1 million) reported in the year-ago quarter. The improvement can primarily be attributed to a rise in operating income and lower interest expenses, offset by a decline in participation in associates’ results, mainly Heineken’s.
Total revenues were $8,367 million (Ps. 167,504 million), which improved 22.2% year over year in the local currency. Revenues, in U.S. dollar, beat the Zacks Consensus Estimate of $7,366 million. Revenue growth was driven by gains across all business units. On an organic basis, total revenues rose 18.9%.
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-eps-surprise-chart | Fomento Economico Mexicano S.A.B. de C.V. Quote
Shares of the Zacks Rank #1 (Strong Buy) company have lost 15.1% in the past three months against the industry’s growth of 1.5%.
FEMSA’s gross profit rose 15.3% year over year to Ps. 62,096 million (US$3,098.6 million). The consolidated gross margin contracted 220 basis points (bps) to 37.1%, owing to the gross margin contraction of 40 bps at Proximity, 110 bps at Health, 70 bps at Fuel operations and 310 bps at Coca-Cola FEMSA S.A.B. de C.V. KOF, partly offset by the margin expansion of 60 bps at the Logistics & Distribution business.
FEMSA’s operating income (income from operations) was up 9.9% year over year to Ps. 15,355 million (US$766.2 million). On an organic basis, operating income improved 8.6%. The consolidated operating margin contracted 100 bps to 9.2%, driven by margin contractions at Coca-Cola FEMSA, FEMSA’s Health Division and the Logistics & Distribution business, offset by margin expansions at the Proximity and Fuel Divisions.
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Segmental Discussion
Proximity Division: Total revenues for the segment rose 18.3% year over year to Ps. 60,136 million (US$3,000.8 million). Organic revenues improved 17.5%. The increase can primarily be attributed to a 15.6% rise in same-store sales on 3.4% growth in store traffic and an 11.1% increase in average ticket. The Proximity Division had 20,668 OXXO stores as of Jun 30, 2022. Operating income accelerated 33.7% year over year, while organic operating income rose 36%. The operating margin for the segment expanded 120 bps to 10.2%, owing to higher operating leverage.
Fuel Division: Total revenues rose 32.5% to Ps. 13,220 million (US$659.7 million). Average same-station sales improved 25.2%, driven by a 16.3% increase in the average volume and 7.6% growth in the average price per liter. Results also gained from volume growth in its institutional and wholesale customer network, as well as a favorable comparison from last year due to the reduced vehicle mobility trends resulting from COVID-19. The company had 569 OXXO GAS service stations as of Jun 30. Operating income advanced 60.7% and the operating margin expanded 70 bps to 4.3%.
Health Division: The segment reported total revenues of Ps. 18,844 million (US$940.3 million), up 2.5% year over year. Revenues benefited from favorable trends across all operations, offset by an unfavorable comparison base in Chile and negative currency translations. On a currency-neutral basis, total revenues increased 12.5%, whereas same-store sales increased 9%. The segment had 3,862 points of sales across all regions as of Jun 30, 2022. The operating income declined 13.4% year over year, while the operating margin contracted 80 bps to 4.9%. The increase can be attributed to a 1.9% increase in operating expenses.
Logistics and Distribution: Total revenues for the segment were Ps. 16,926 million (US$844.6 million), up 50.2% year over year. On an organic basis, revenues advanced 17.3%. Revenues reflected positive demand trends across several categories in the United States, as well as strong growth of warehouse management operations in Latin America. The segment’s operating income increased 40.3%, whereas the operating margin contracted 30 bps to 4.9%. Organic operating income declined 3%.
Coca-Cola FEMSA: Total revenues for the segment advanced 19.9% year over year to Ps. 57,311 million (US$2,859.8 million). KOF’s revenues were mainly aided by improved volume, pricing initiatives, a positive price mix and favorable currency translation effects.
On a comparable basis, Coca-Cola FEMSA’s revenues improved 16.4% year over year. KOF’s consolidated operating income increased 5.6% and comparable operating income rose 1.8%. The segment’s operating margin contracted 180 bps to 13.4%, driven by a lower gross margin rate, offset by strong top-line growth.
Financial Position
FEMSA had cash and cash equivalents of Ps. 105,900 million (US$5,300.3 million) as of Jun 30, 2022. Long-term debt was Ps. 158,995 million (US$7,957.7 million). The company incurred a capital expenditure of Ps. 6,296 million (US$314.2 million) in the second quarter, reflecting higher investments in most businesses.
Other Stocks to Consider
We highlighted some other top-ranked stocks to consider from the broader Consumer Staples space, namely The Duckhorn Portfolio NAPA and Brown-Forman (BF.B).
Duckhorn currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 12.2%. NAPA has a trailing four-quarter earnings surprise of 94.4%, on average. The company has declined 14.7% in the past year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Duckhorn’s current financial-year sales and earnings per share suggests growth of 10.8% and 6.9%, respectively, from the year-ago reported numbers. The consensus mark for NAPA’s earnings per share has been unchanged in the past 30 days.
Brown-Forman currently carries a Zacks Rank #2. BF.B has a trailing four-quarter earnings surprise of 8.1%, on average. The company has risen 3.8% in the past year.
The Zacks Consensus Estimate for Brown-Forman’s current financial year’s sales and earnings per share suggests growth of 7.2% and 14.4%, respectively, from the year-ago reported numbers. The consensus mark for BF.B’s earnings per share has been unchanged in the past 30 days.
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BrownForman Corporation (BF.B) : Free Stock Analysis Report
Fomento Economico Mexicano S.A.B. de C.V. (FMX) : Free Stock Analysis Report
Coca Cola Femsa S.A.B. de C.V. (KOF) : Free Stock Analysis Report
The Duckhorn Portfolio, Inc. (NAPA) : Free Stock Analysis Report
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