Analyst Note| Nicholas Johnson, CFA |
With Coca-Cola Femsa having reported before narrow-moat Femsa’s fourth-quarter earnings print, we suspect investors were primarily aiming to gauge the health of the latter's the proximity unit (housing its crown-jewel Oxxo convenience store chain) and ancillary units (like Jetro Restaurant Depot and Waxie), looking for any inkling as to the timing and structure of upcoming financial disclosures for these increasingly sizable businesses. While results were mixed--ahead on revenue and slightly behind on profit relative to our expectations--management commentary was generally constructive, and we believe the core businesses remain well positioned strategically. After accounting for time value as well as disclosures once the firm’s 20-F is filed, we’ll likely raise our $82 per ADR fair value estimate modestly. The shares rallied meaningfully toward the end of last year but have since tapered off, rendering them undervalued, in our view.