KOF - FEMSA Has The Pieces In Place For The Next Round Of Growth
- FEMSA's fourth quarter results aren't going to ease near-term worries on margin leverage, as revenue exceeded expectations but EBITDA margin came up about 50bp short.
- OXXO is seeing decent growth and better operating leverage, but a weak recovery in in-store traffic needs to be watched.
- Management's expansion into U.S. janitorial/sanitation distribution makes some sense on a longer-term FCF basis, but management needs to do a better job highlighting the value-creation arguments.
- FEMSA shares look undervalued on the basis of long-term revenue and FCF growth in the 6%-7% range, but near-term margin pressures and sluggish traffic are real concerns.
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FEMSA Has The Pieces In Place For The Next Round Of Growth