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Here's What You Should Expect From FEMSA (FMX) in Q1 Earnings

Fomento Economico Mexicano, S.A.B. de C.V. FMX or FEMSA is slated to report first-quarter 2021 results on Apr 29. The company is likely to register top and bottom-line declines when it reports quarterly results. The Zacks Consensus Estimate for its first-quarter earnings of 39 cents per share suggests a 69.8% decline from the year-ago quarter’s reported figure.

Moreover, the consensus mark for quarterly revenues is pegged at $6.13 billion, indicating a decline of 0.6% from the figure reported in the year-ago quarter.

Factors at Play

Despite the pandemic-led challenges, FEMSA has been witnessing a positive gross margin trend over the past few quarters. The company has been exercising tight control over expenses and supply-chain operations, which is expected to have aided gross margin again in the first quarter. We note that FEMSA’s consolidated gross margin expanded 60 bps, 90 bps and 60 bps, respectively, in the fourth, third and second quarters of 2020.

Additionally, the company’s digital initiatives and business expansion endeavors have been on track. Its focus to offer customers more options to make contactless purchases by intensifying digital and technology-driven initiatives across operations is expected to have boosted digital sales in the to-be-reported quarter. The company’s Coca-Cola FEMSA business has been leading the way with its omni-channel business, while FEMSA Comercio has been progressing with the adoption of digital initiatives.

Within its OXXO store chains, the company is anticipated to have witnessed gains from investments in digital offerings, loyalty programs and fintech platforms.

However, FEMSA’s first quarter is expected to have witnessed continued headwinds related to the coronavirus outbreak that has been affecting operations across most of its segments. Soft sales trends at its OXXO and OXXO Gas operations, owing to the second wave of COVID-19 cases and the virus variant, are expected to have hurt its first-quarter performance.

Additionally, FEMSA Comercio’s Fuel Division has been most impacted by the pandemic-led challenges. The Fuel Division has been witnessing soft trends due to reduced mobility and social distancing, which led to lesser vehicle utilization. The impacts of these are likely to get reflected in the Fuel Division’s results for the first quarter.

Further, the increase in operating expenses, resulting from the ongoing initiatives to strengthen the compensation structure for store personnel as well as higher investments in IT programs and infrastructure, is expected to have hurt operating income in the first quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for FEMSA 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 has a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks Likely to Deliver Earnings Beat

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

Energizer Holdings, Inc. ENR presently has an Earnings ESP of +9.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coty Inc. COTY currently has an Earnings ESP of +350.00% and a Zacks Rank #3.

Tyson Foods, Inc. TSN has an Earnings ESP of +16.03% and a Zacks Rank #3 at present.

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Tyson Foods, Inc. (TSN): Free Stock Analysis Report
 
Fomento Economico Mexicano S.A.B. de C.V. (FMX): Free Stock Analysis Report
 
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