FEMSA Q2 Earnings & Revenues Miss Estimates, Mexico Operations Hurt

Core Insights - FEMSA reported a second-quarter 2025 net majority earnings per ADS of $0.42, down from $1.87 in the same quarter last year, missing the Zacks Consensus Estimate of $0.91 [1][7] - Total revenues for the quarter were $10.84 billion, reflecting a 6.3% year-over-year increase in local currency, but fell short of the Zacks Consensus Estimate of $11.2 billion [2][7] - The company's net consolidated income was Ps. 5,593 million (approximately $297 million), showing a growth of 64.3% from the previous year [1] Revenue and Earnings Performance - Revenue growth was driven by gains in business units outside Mexico and favorable currency rates due to the depreciation of the Mexican Peso [2] - Including currency effects and M&A, revenues grew by 2.2% year over year [2] - The gross profit increased by 4.2% year over year to Ps. 85,922 million (approximately $4.56 billion), but the consolidated gross margin contracted by 80 basis points to 40.7% [4][8] Segment Performance - Proximity Americas: Revenues rose 6.9% year over year to Ps. 83,958 million (approximately $4.5 billion), but same-store sales dropped by 0.4% due to a decline in store traffic [9] - Proximity Europe: Revenues grew 31.4% year over year to Ps. 15,065 million (approximately $800 million), benefiting from currency appreciation [11] - Health Division: Revenues increased by 15.6% year over year to Ps. 21,850 million (approximately $1.16 billion), with same-store sales rising by 13.1% in Mexican pesos [12] - Fuel Division: Revenues rose 0.6% year over year to Ps. 17,100 million (approximately $908.2 million), with operating income improving by 13.6% [13] - Coca-Cola FEMSA: Revenues advanced 5% year over year to Ps. 72,917 million (approximately $3.9 billion), but the operating margin contracted by 60 basis points to 13.4% [14] Financial Position - As of June 30, 2025, FEMSA had cash and cash equivalents of Ps. 129,825 million (approximately $6.9 billion) and long-term debt of Ps. 136,215 million (approximately $7.2 billion) [15] - Capital expenditure in the second quarter totaled Ps. 9,203 million (approximately $488.8 million), a decline from the previous year due to reduced spending in Proximity Americas and the Health division [15]