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Will FEMSA (FMX) Repeat its Dismal Earnings Trend in Q1?

Fomento Economico Mexicano, S.A.B. de C.V.FMX or FEMSA is slated to report first-quarter 2018 results on Apr 26, after the closing bell.

The company's earnings missed the Zacks Consensus Estimate in three of the trailing four quarters. However, it delivered an average positive surprise of 45.9%. Notably, the company has been losing its position, lately, due to a dismal surprise trend for both top and bottom lines. It has delivered negative earnings surprise in five of the preceding six quarters. Moreover, revenues lagged estimates in three of the last four quarters.

The question lingering in investors' minds now is, whether or not FEMSA will be able to deliver a positive earnings surprise in the quarter to be reported.

What to Expect?

The Zacks Consensus Estimate for the quarter under review is pegged at 55 cents, which moved up 2 cents in the last seven days. Further, the estimate for the quarter reflects 12.2% growth year over year. Additionally, analysts polled by Zacks expect revenues of $6.12 billion, representing rise of 13.1% from the year-ago quarter.

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 and EPS Surprise | Fomento Economico Mexicano S.A.B. de C.V. Quote

Factors Likely to Impact the Quarter

We remain impressed with FEMSA's focus on strategic measures, including expanding store base, diversifying business portfolio and focus on core business activities. Evidently, the company has been taking prudent steps to diversify its product portfolio while expanding in the small-box retail segment, which bode well for future operating performance.

Moreover, its focus on achieving growth via acquisitions looks good. The company's exposure in various industries, including beverage, beer and retail, gives FEMSA an edge over competitors. In fact, the company's strong cash flow generation capacity enables it to make incremental investments in business expansion.

These attributes have helped the stock gain 8.1% in the past month, outperforming 0.3% growth recorded by the industry . This reflects a positive sentiment on the stock ahead of earnings.

However, we cannot ignore the near-term headwinds that may bother the stock's growth. These mainly include the dismal top- and bottom-line trends, as well as the continued decline in margins.

So, let's see if FEMSA's upcoming quarterly performance can help it break the dismal earnings surprise trend backed by its strategic endeavors.

What the Zacks Model Unveils?

Our proven model does not show that FEMSA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

While FEMSA has a Zacks Rank #3, an Earnings ESP of 0.00% lowers the chances of a beat in the ensuing release.

Stocks With Favorable Combination

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:

The Coca-Cola Company KO has an Earnings ESP of +0.24% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

The Boston Beer Company Inc. SAM has an Earnings ESP of +35.65% and a Zacks Rank #3.

Colgate-Palmolive Company CL has an Earnings ESP of +0.69% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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