Fomento Economico Mexicano S.A.B. de C.V. FMX, alias FEMSA, reported first-quarter 2025 net majority earnings per ADS of 79 cents (Ps. 1.62 per FEMSA unit). The company posted adjusted net majority earnings per ADS of 45 cents, down from 47 cents in the year-ago quarter and missed the Zacks Consensus Estimate 52 cents.

Net consolidated income was Ps. 8,943 million (US$437.1 million), reflecting growth of 54.3% from the year-ago quarter.

Total revenues were US$9.58 billion (Ps. 195,820 million), which improved 11.1% year over year in the local currency. Revenue growth was driven by gains across all business units and favorable currency rates due to the depreciation of the Mexican Peso against most of its operating currencies. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Shares of this Zacks Rank #4 (Sell) company have rallied 21.9% in the past three months compared with the industry’s 6.6% growth.

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Peeking Into FMX’s Q1 Margin Details

FEMSA’s gross profit rose 15.8% year over year to Ps. 78,918 million (US$3.86 billion). The consolidated gross margin expanded 160 basis points (bps), owing to the gross margin expansion in Proximity Americas, Health, Fuel and Coca-Cola FEMSA, offset by margin declines in Proximity Europe.

The company’s gross margin expanded 120 bps at Proximity Americas, 60 bps at the Health, and 30 bps in the Fuel segment. The gross margin was down 110 bps at the Proximity Europe and 80 bps at the Coca-Cola FEMSA segment.

FEMSA’s operating income (income from operations) improved 4.9% year over year to Ps. 13,565 million (US$663.1 million). The consolidated operating margin declined 40 bps to 6.9%, driven by declines across the Proximity Americas, Proximity Europe, Fuel and Coca-Cola FEMSA segments, partially offset by margin growth in the Health division.

FEMSA’s Q1 Segmental Performance

Proximity Americas: Total revenues for the segment rose 6.8% year over year to Ps. 74,886 million (US$3.7 billion). Excluding the addition of the U.S. operation to the division that it began consolidating on Oct. 1, 2024, as well as currency tailwinds, total revenues increased 1.4%. The company reported a 1.8% decline in same-store sales for Proximity Americas, driven by a 6.6% store traffic decline, offset by a 5.1% rise in average customer tickets.

The Proximity Americas division had 24,846 OXXO stores as of March 31, 2025. Operating income declined 11.8% year over year. The segment's operating margin contracted 120 bps to 5.9%, driven by higher selling expenses related to increased labor costs, following a low-double-digit minimum wage hike in Mexico earlier this year. The increase was driven by higher administrative expenses from ongoing investments in commercial capabilities like segmentation, revenue management and data analytics.

Proximity Europe: Total revenues for the segment grew 18% year over year to Ps. 12,909 million (US$631 million). The segment benefited from currency appreciation against the Mexican peso. Excluding currency effects, total revenues for the segment were flat year over year due to flat retail sales and lower sales in its B2B foodservice business. Operating income for the segment declined 14.6% year over year and the operating margin contracted 90 bps to 2.6% on a weaker B2B foodservice business.

Health Division: The segment reported total revenues of Ps. 21,972 million (US$1.07 billion), up 21% year over year. Revenues were aided by growth in Colombia, Chile and Ecuador, partially offset by a challenging competitive landscape and store closures in Mexico. The segment’s store base reached 4,594 locations as of March 31, 2025. Same-store sales rose 15.4% in the quarter. The operating income improved 27.4% year over year, while the operating margin expanded 20 bps to 3.5%.

Fuel Division: Total revenues rose 1.8% year over year to Ps. 15,237 million (US$744.8 million). Average same-station sales rose 6.1%, driven by a 0.2% increase in the average volume and a 5.9% rise in the average price per liter. The company had 562 OXXO Gas service stations as of March 31, 2025. Operating income declined 13.9%, while the operating margin contracted 50 bps to 3%.

Coca-Cola FEMSA: Total revenues for the segment advanced 10% year over year to Ps. 70,157 million (US$3.4 billion). Coca-Cola FEMSA’s consolidated operating income increased 7.4%. The segment’s operating margin contracted 30 bps to 13.2%.

FEMSA’s Financial Position

As of March 31, 2025, FEMSA had cash and cash equivalents of Ps. 109,345 million (US$5.3 billion). The company’s long-term debt was Ps. 131,736 million (US$6.4 billion). In the first quarter of 2025, capital expenditure totaled Ps. 8,788 million (US$429.6 million), caused by increased investments in production and distribution capacity. In Proximity Americas, spending is focused on store expansion, store remodeling and optimization, and enhancing commercial capabilities to improve the value proposition and customer experience.

Stocks to Consider

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Primo Brands Corporation PRMB, Keurig Dr Pepper Inc. KDP and Carlsberg CABGY.

Primo Brands is a branded beverage company focused on healthy hydration, delivering sustainably and domestically sourced diversified offerings. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for PRMB’s 2025 earnings and sales indicates growth of 146.6% and 57.4%, respectively, from the previous year’s reported figures. Primo Brands has a trailing four-quarter average earnings surprise of 7.2%.

Keurig is a prominent integrated brand owner, manufacturer, and distributor of beverages across the United States, Canada, Mexico, and the Caribbean. It presently flaunts a Zacks Rank #2.

The Zacks Consensus Estimate for Keurig’s 2025 sales and EPS indicates growth of 5.5% and 5.7%, respectively, from the prior-year reported levels. KDP delivered a trailing four-quarter earnings surprise of 3.1%, on average.

Carlsberg is a brewing company and has operations in Northern and Western Europe, Eastern Europe, and Asia. CABGY currently has a Zacks Rank #2.

The Zacks Consensus Estimate for the company’s 2025 sales and earnings implies growth of 23.4% and 3.8%, respectively, from the previous year’s reported number.

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Fomento Economico Mexicano S.A.B. de C.V. (FMX) : Free Stock Analysis Report

Carlsberg AS (CABGY) : Free Stock Analysis Report

Keurig Dr Pepper, Inc (KDP) : Free Stock Analysis Report

Primo Brands Corporation (PRMB) : Free Stock Analysis Report

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