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Will FEMSA's (FMX) Earnings Fall Shy of Estimates in Q3?

Fomento Económico Mexicano, S.A.B de C.V. FMX, also known as FEMSA, is slated to report third-quarter 2016 results on Oct 28. Last quarter, the company delivered a positive earnings surprise of 12.1%.

However, the leading Latin American beverage company delivered negative earnings surprises in two out of the last four quarters, with an average negative surprise of 7.7%. Let’s see how things are shaping up for this announcement.

FOMENTO ECO-ADR Price and EPS Surprise

 

FOMENTO ECO-ADR Price and EPS Surprise | FOMENTO ECO-ADR Quote

Factors Influencing This Quarter

FEMSA is on track to drive growth through its strategic initiatives, which include increasing store count, diversifying business portfolio and focusing on core business activities. Additionally, the company's strong cash flow generation capacity enables it to make incremental investments in business expansion.

However, the company has been struggling, mainly due to currency headwinds, which has been weighing on Coca-Cola FEMSA for a while now. Further, soft Heineken performance has been a hindrance in the recent past. Additionally, FEMSA has been witnessing strained margins owing to growth of lower-margin businesses. We believe that persistence of these headwinds and regulatory pressure may impact future results. Together, these factors make us slightly cautious of the upcoming results.

Earnings Whispers

Our proven model does not conclusively 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, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for FEMSA is currently +10.35%. This is because the Most Accurate estimate of 96 cents stands above the Zacks Consensus Estimate of 87 cents.

Zacks Rank: FEMSA currently carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

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

Amazon.com Inc. AMZN, scheduled to report earnings on Oct 27, has an Earnings ESP of +6.98% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AutoNation Inc. AN, scheduled to report earnings on Oct 28, has an Earnings ESP of +0.88% and a Zacks Rank #3 (Hold).

Avis Budget Group Inc. CAR, slated to report earnings on Nov 2, has an Earnings ESP of +0.85% and a Zacks Rank #3.

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AVIS BUDGET GRP (CAR): Free Stock Analysis Report
 
AUTONATION INC (AN): Free Stock Analysis Report
 
AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
FOMENTO ECO-ADR (FMX): Free Stock Analysis Report
 
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