Femsa Earnings: Revenue Growth Management and In-Store Services to Fuel Convenience Retail Growth

We plan to maintain our $110 fair value estimate for narrow-moat Femsa after absorbing third-quarter results. Sales grew 8% and operating profits grew 15% on bottling strength, resilient convenience retail performance despite soft traffic trends, and a favorable currency translation impact due to Mexican peso depreciation. The firm’s retail and bottling expertise, coupled with demographic and income tailwinds in Latin America, should continue to support our constructive view on Femsa’s long-term growth outlook, including our 10-year forecasts for 7% annual sales growth and 9% average operating margins. The shares appear undervalued.