Fomento Economico Mexicano, S.A.B. de C.V.
), also known as FEMSA, is set to report second-quarter 2014
results on Jul 25. Last quarter, it posted a positive surprise of
66.67%. Let us see how things are shaping up for this announcement.
Factors Influencing the Upcoming Quarter
We believe FEMSA's robust performance and initiatives to diversify
its portfolio constitute its strengths. Going forward, we perceive
the company's divestment of Quimiproductos has provided it with
greater financial and strategic flexibility to pursue opportunities
in its core businesses. Further, the company's efforts to diversify
its product portfolio along with expansion of its convenience store
chain bode well for future operating performance.
However, the company's results could be impacted by the imposition
of tax on sugary beverages by the Mexican government in order to
tackle the rising obese population of the country. This may lead to
significant attrition in the Mexican soda market affecting the
company's top and bottom lines.
Our proven model does not conclusively project FEMSA as likely to
beat earnings this quarter. A stock needs to have both positive
and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However,
that is not the case here due to the following factors:
ESP for FEMSA is 0.00% since the Most Accurate Estimate stands at
76 cents per share, which is in line with the Zacks Consensus
Zacks #3 Rank (Hold):
FEMSA's Zacks Rank #3 increases the predictive power of ESP.
However, we need to have a positive ESP to be confident of an
earnings surprise call. We caution against stocks with a Zacks Rank
#4 and 5 (Sell-rated stocks) going into earnings announcement,
especially when the company is undergoing negative estimate
Other Stocks to Consider
FEMSA is not the only firm looking up this earnings season. Our
model shows that the following stocks have the right combination of
elements to post an earnings beat:
Avis Budget Group Inc.
) with an Earnings ESP of +3.18% and a Zacks Rank #1 (Strong Buy)
Archer Daniels Midland Co.
) with an Earnings ESP of +9.33% and a Zacks Rank #2 (Buy)
) with an Earnings ESP of +1.37% and a Zacks Rank #2
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