FEMSA Q3 Earnings Decline Y/Y, Sales Improve on Segmental Growth

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Fomento Economico Mexicano S.A.B. de C.V. FMX, alias FEMSA, reported third-quarter 2024 net majority earnings per ADS of 84 cents (Ps. 1.65 per FEMSA unit). The company posted adjusted net majority earnings per ADS of $1.37, down from $1.75 in the year-ago quarter.

Net consolidated income was Ps. 9,243 million (US$469.4 million), reflecting a decline of 27.5% from the year-ago quarter.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Total revenues were $10 billion (Ps. 196,771 million), which improved 8.3% year over year in the local currency. Revenue growth was driven by gains across all business units and favorable currency rates due to the depreciation of the Mexican Peso against most of its operating currencies.

Shares of the Zacks Rank #3 (Hold) company have lost 9.1% in the past three months compared with the industry’s 0.4% decline.

 

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A Peek Into FMX’s Q3 Margin Details

FEMSA’s gross profit rose 12.1% year over year to Ps. 79,368 million (US$4.03 billion). The consolidated gross margin expanded 130 basis points (bps), owing to the gross margin expansion in Health, Proximity Americas and Coca-Cola FEMSA, and steady margins in Fuel and Proximity Europe.

The company’s gross margin expanded 300 bps at Proximity Americas, 90 bps at the Health division and 20 bps at the Coca-Cola FEMSA segments. The gross margin was flat year over year in the Fuel and Proximity Europe segments.

FEMSA’s operating income (income from operations) improved 14.6% year over year to Ps. 17,374 million (US$882.4 million), driven by growth across all its operating segments. The consolidated operating margin increased 50 bps to 8.8%, driven by margin expansion at the Proximity Americas, Proximity Europe, Coca-Cola FEMSA and Fuel segments. Operating margin growth was partially offset by contraction in the Health division.

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. 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

FEMSA’s Q3 Segmental Performance

Proximity Americas: Total revenues for the segment rose 4.8% year over year to Ps. 77,594 million (US$3.9 billion). The company reported flat same-store sales for Proximity Americas, driven by a 6.1% rise in average customer tickets, offset by a 5.7% store traffic decline. The lower store traffic was due to adverse weather conditions in Mexico, a challenging comparison period, and a weaker consumer environment in Mexico since the end of the second quarter.

The Proximity Americas division had 24,008 OXXO stores as of Sept. 30, 2024. Operating income improved 5.9% year over year. The operating margin for the segment expanded 10 bps to 9% due to a higher gross margin, offset by an increase in operating expenses.

Proximity Europe: Total revenues for the segment grew 20.4% year over year to Ps. 13,480 million (US$684.6 million). The segment benefited from strong sales across all countries, attributed to robust growth in retail sales and the B2B foodservice business. The Proximity Europe division had 2,777 points of sale as of Sept. 30, 2024. Operating income for the segment rose 57.2% year over year, and the operating margin expanded 100 bps on solid gains from the B2B foodservice and retail business, and effective cost management.

Health Division: The segment reported total revenues of Ps. 20,883 million (US$1.06 billion), up 12.5% year over year. Revenues were aided by growth across all countries and the appreciation of currencies against the Mexican peso. The segment’s store base reached 4,532 locations as of Sept. 30, 2024. Same-store sales rose 7.4% in the quarter. The operating income improved 7.2% year over year, while the operating margin contracted 20 bps to 4.3%.

Fuel Division: Total revenues rose 8.2% year over year to Ps. 17,076 million (US$867.2 million). Average same-station sales rose 7.6%, driven by a 1.3% increase in the average volume and a 6.2% rise in the average price per liter. The company had 569 OXXO GAS service stations as of Sept. 30, 2024. Operating income rose 17% and the operating margin expanded 40 bps to 4.9%.

Coca-Cola FEMSA: Total revenues for the segment advanced 10.7% year over year to Ps. 69,601 million (US$3.5 billion). Coca-Cola FEMSA’s consolidated operating income increased 13.9%. The segment’s operating margin expanded by 30 bps to 13.8%.

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