Femsa Earnings: Solid Convenience Store Sales on Robust Traffic Trend and Strong Merchandising

We plan to raise our $97 fair value estimate on narrow-moat Femsa by a mid-single-digit percentage to incorporate better-than-expected third-quarter results, a stronger Mexican peso against the U.S. dollar and time value. Revenues grew 12% (excluding the Valora acquisition), and operating profits rose 10%, outpacing our estimates of 10% and 9%, respectively. Results were thanks to solid same-store sales at Oxxo and resilient beverage volume at subsidiary Coke Femsa. We plan to nudge up our 2023 profit projection by a low-single-digit percentage, but 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.