Driven by robust segmental performance,
Fomento Economico Mexicano S.A.
) - also known as FEMSA - reported better-than-expected
fourth-quarter 2012 result. This largest franchise bottler for
) posted net majority income of $2.08 (Ps. 2.70) per share,
beating the Zacks Consensus Estimate of $1.51. Moreover,
quarterly earnings of this Zacks Rank #3 (Hold) company jumped
nearly 92.6% from the year-ago quarters' earnings of $1.08 per
Quarter in Detail
Total revenue grew 11.8% year over year to Ps. 63.436 billion
($4.899 billion), mainly aided by improvements in revenue at
. On an organic basis, total revenue climbed 9.0% from the
prior-year comparable period. Moreover, it also surpasses the
Zacks Consensus Estimate of $3.994 billion.
FEMSA's gross profit increased 14.8% year over year to Ps.
28.029 billion ($2.165 billion), and gross margin expanded 120
basis points (bps) to 44.2%. The increase was primarily driven by
gross profit improvements at
FEMSA's operating income surged 24.9% to Ps. 9.735 billion
($0.752 billion) from Ps. 7.794 billion ($0.572 billion) in the
year-ago period. On an organic basis operating income jumped
22.4% year over year. Driven by margin expansions at the
company's Coca-Cola FEMSA segment, consolidated operating margin
expanded 160 bps to 15.3%.
Total revenue at
soared 10.4% to Ps. 39.860 billion ($3.078 billion) in the
quarter, primarily driven by a double-digit revenue growth in
Mexico & Central America division along with the benefits
from the acquisitions of Grupo CIMSA and Grupo Fomento Queretano
in Mexico. Excluding these acquisitions, total revenue escalated
The segment's operating income for the quarter surged 29.5% to
Ps. 7.224 billion ($0.558billion) from the year-ago quarter,
primarily driven by robust performances across both the divisions
along with acquisition benefits. Consequently, Coca-Cola FEMSA's
operating margin improved 260 bps to 18.1%. Excluding the recent
acquisitions impact, operating income was 26.0% higher than the
registered a revenue growth of 15.6% to Ps. 22.671 million
($1.751 billion), mainly due to the opening of 434 net new stores
in the quarter along with a 7.5% upside in same-store sales. The
growth in same-store sales was primarily driven by an increase of
4.8% in average customer ticket and a rise of 2.5% in customer
traffic. The company opened 1,040 net new stores in 2012 bringing
the total store counts to 10,601.
Operating income, for the quarter under review, jumped 17.0%
year over year to Ps. 2.406 billion ($0.186 billion). Segment's
operating margin expanded 10 bps to 10.6%, primarily due to
improved gross margin, partially offset by increased expenses due
to store openings, increased expenses on organizational and IT
structure and developing specialized distribution channels.
At the end of 2012, the company had cash and cash equivalents
of Ps. 38.116 billion ($2.940 billion). Long-term debt at the end
of the fiscal reached Ps. 27.574 billion ($2.127 billion). During
the fiscal, FEMSA made a capital expenditure of Ps. 15.560
billion ($1.182 billion), mainly towards incremental investments
at Coca-Cola FEMSA.
In an effort to enhance its convenience store chain business,
the company's retail subsidiary - FEMSA Comercio - is on the
verge of acquiring a 75% stake in a leading drugstore operator in
Southeast Mexico, Farmacias YZA. We believe that the company's
foray into the drugstore business strategically fits its store
chain business, which will be accretive to its top and bottom
lines in the long term.
Other Stocks to Consider
Apart from FEMSA, other stocks in the Beverages-Brewers
industry worth considering include
Coca-Cola Hellenic Bottling Company S.A.
Coca-Cola Enterprises Inc.
). Both the companies hold a Zacks Rank #2 (Buy).
COCA-COLA ENTRP (CCE): Free Stock Analysis
COCA COLA HELNC (CCH): Free Stock Analysis
FOMENTO ECO-ADR (FMX): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
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