Femsa Earnings: Merchandising and New Stores Drove Oxxo Growth; Beverage Segment Resilient

We expect to raise our $97 fair value estimate on narrow-moat Femsa by a mid-single digit percentage to incorporate better-than-expected second-quarter results and Mexican peso appreciation against the U.S. dollar. Organic revenue grew 9.5% (excluding the Valora acquisition) and operating profits were up 4.5%, edging our estimates (8.7% and 4.1%, respectively). Thus, we are nudging up our pre-print 2023 estimate by a low-single-digit percentage on the bottom line. Our 10-year forecasts for annual sales growth and average operating margins both in the high-single digits remain in place. Shares trade in a range we’d consider fairly valued.