FEMSA (FMX) to Expand Digital Payments With NetPay Buyout
Fomento Económico Mexicano, S.A.B. de C.V. FMX, alias FEMSA, inked a deal to acquire all of the outstanding shares of NetPay. In 2019, FEMSA bought a minority equity stake in NetPay, which offers payment services and solutions to micro, small and medium-sized businesses in Mexico.
The current deal is likely to close in the first quarter of fiscal 2023. The move will help expand FEMSA’s digital payments portfolio, which includes the Spin by OXXO wallet and OXXO Premia’s loyalty strategy.
FEMSA continues to focus on offering customers more options to make contactless purchases by intensifying digital and technology-driven initiatives across operations. Within its OXXO store chains, the company is on track with investing in digital offerings, loyalty programs and fintech platforms to evolve stronger after the pandemic and over the long term.
The company’s OXXO digital wallet, OXXO Premia and loyalty program have been performing well. In the second quarter of fiscal 2022, it made progress on its digital efforts, with customer acquisition surpassing 15 million users. The users are part of the company’s digital ecosystem either through Spin by OXXO, OXXO Premia or both.
What’s More?
FEMSA has been gaining from its effective growth strategies and robust demand across most markets. The company has been on track with its strategy of creating a national distribution platform in the United States through the expansion of its footprint in the specialized distribution industry. Its venture in the specialized distribution industry relates to its plan of investing in adjacent businesses, which can leverage capabilities across different markets, providing an opportunity for attractive growth and risk-adjusted returns.
With the presence of its OXXO business and other retail operations, the company has become an expert in the organization and management of supply chains and distribution systems. Notably, FEMSA serves large numbers of businesses and retail customers through millions of interactions in different industries.
We note that this Zacks Rank #3 (Hold) stock gained 23.1% in the past three months compared with the industry’s growth of 0.1%.
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However, it has been witnessing the impacts of supply-chain disruptions and higher raw material costs. This dented margins in the fiscal second quarter. Consolidated gross margin contracted 220 basis points (bps) to 37.1%, owing to the gross margin contraction of 40 bps at Proximity, 110 bps at Health, 70 bps at Fuel operations and 310 bps at Coca-Cola FEMSA, partly offset by the margin expansion of 60 bps at the Logistics & Distribution business.
The consolidated operating margin contracted 100 bps to 9.2%, driven by margin contractions at Coca-Cola FEMSA, FEMSA’s Health Division and the Logistics & Distribution business, offset by margin expansions at the Proximity and Fuel Divisions.
Also, the increase in prices for aluminum has escalated the cost of producing cans for these beverages. Escalating industry-wide freight costs and increased other input costs remain concerning.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Constellation Brands STZ, Dutch Bros BROS and Limoneira Co LMNR.
Constellation Brands currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.1%. STZ has a trailing four-quarter earnings surprise of 10.5%, on average. The company has gained 5.6% in the past year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Constellation Brands’ current financial-year sales suggests growth of 3.5% from the year-ago reported numbers, whereas the same for earnings indicates a decline of 5.1%. The consensus mark for STZ’s earnings per share has moved down 5.7% in the past 30 days.
Dutch Bros currently has a Zacks Rank of 2. BROS has a trailing four-quarter earnings surprise of 53%, on average. It has a long-term earnings growth rate of 32%. The company has declined 48.6% in the past year.
The Zacks Consensus Estimate for Dutch Bros’ current financial-year sales suggests growth of 51.2% from the prior-year reported number, whereas the same for earnings suggests a year-over-year decline of 73.9%. The consensus mark for BROS’ earnings per share has moved down 25% in the past 30 days.
Limoneira currently carries a Zacks Rank #2. LMNR has a trailing two-quarter earnings surprise of 13.3%, on average. It has a long-term earnings growth rate of 15%. The company has declined 20.4% in the past year.
The Zacks Consensus Estimate for Limoneira’s current financial-year loss per share suggests growth of 67.9% from a loss per share of 28 cents reported in the year-ago quarter, whereas the same for sales suggests a decline of 1.6%. The consensus estimate for LMNR’s loss per share has narrowed by 2 cents in the past 30 days.
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Fomento Economico Mexicano S.A.B. de C.V. (FMX) : Free Stock Analysis Report
Constellation Brands Inc (STZ) : Free Stock Analysis Report
Limoneira Co (LMNR) : Free Stock Analysis Report
Dutch Bros Inc. (BROS) : Free Stock Analysis Report
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