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Coca-Cola Femsa SAB de CV KOF

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Morningstar’s Analysis

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Currency Remains Albatross on Coke Femsa Q1; Fundamentals Solid, and Shares Still Attractive

Analyst Note

| Nicholas Johnson, CFA |

Slipshod vaccination campaigns across its territories, weak functional currencies (particularly the Brazilian real and Argentine peso), and general macro uncertainty continued to beleaguer shares of narrow-moat Coke Femsa heading into its first-quarter earnings print. Still, the results were solid (ahead of our expectations on both volume and profit), and underlying fundamentals are on the upswing even as currency continues to challenge headline results. We don’t plan to materially change our $65 per ADR fair value estimate outside of currency adjustments, and while shares have moved off the egregiously cheap lows of 2020, we still believe they present a compelling long-term opportunity for patient investors.

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Company Profile

Business Description

Coca-Cola Femsa, a subsidiary of Femsa, is the largest franchise bottler of the Coca-Cola Co. by volume. The firm primarily purchases beverage concentrates from TCCC, which it processes and packages, and then distributes the finished trademark beverages to on- and off-premises retailers. While Mexico and Brazil are Coca-Cola Femsa's most important markets, generating roughly 80% of sales, the firm operates in other Central and South American countries, including Panama, Guatemala, Uruguay, and Argentina. The equity value of the firm is divvied up between Femsa (which owns series A shares), TCCC (series D), and the public, holding 47%, 28%, and 25% economic interests, respectively. Series A and D shares control 89% of the voting rights and are not publicly listed.

Calle Mario Pani Number 100, Santa Fe Cuajimalpa
Ciudad de Mexico, DF, 05348, Mexico
T +52 5515195000
Sector Consumer Defensive
Industry Beverages - Non-Alcoholic
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 80,000