FEMSA's Sluggish Margins Give Some Fodder To Bears, But The Business Is Fine

Relative to a slowing Mexican economy, particularly in the consumer sector, FEMSA’s (FMX) third quarter results were pretty good, but Wall Street doesn’t care so much and bears will no doubt fret about the still-weak same-store trends in Health, the sluggish margins at OXXO, and management’s willingness to deploy capital into non-traditional business ventures. I’m tempted to say “let them fret,” as I believe FEMSA management has proved itself many times over, but as a shareholder, of course, I’d like to see the shares trading closer to my assessment of fair value. While I do see some near-term challenges in OXXO’s margins and maybe some longer-term uncertainty in what management may do with the Coca-Cola FEMSA (KOF) stake, I still like the direction of this business and I think the ADRs should trade over $100 despite some near-term weakness in the Mexican consumer space.

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FEMSA's Sluggish Margins Give Some Fodder To Bears, But The Business Is Fine