Fomento Economico Mexicano S.A.B. de C.V. FMX, also known as FEMSA, has reaffirmed its commitment to long-term value creation by concentrating on its core business verticals. This focus aligns with the "FEMSA Forward" strategy, introduced in early 2023, which seeks to streamline FEMSA's operations by divesting non-core businesses.

In the latest announcement, the company has completed the divestiture of its refrigeration and food service equipment operations, including Imbera and Torrey, to Mill Point Capital LLC, a private equity firm focused on control investments. The deal, valued at approximately 4,060 million Mexican pesos on a cash-free, debt-free basis, was first announced on July 17, 2024. This divestiture supports FEMSA’s balance sheet through cash inflow and advances its strategic focus on core businesses.

FEMSA’s Forward Strategy concentrates on businesses including retail (including the Health Division), Coca-Cola FEMSA and Digital@FEMSA. The strategy includes exploring alternatives for the company’s strategic businesses, including potential divestments.

FEMSA made significant strides in advancing its "FEMSA Forward" strategy. This includes the agreement to divest Solistica, and the closure of the Delek transaction in the United States, which the company is now actively managing.

As part of this initiative, FEMSA sold 13.9% of its outstanding shares in Heineken in 2023, reducing its stake to less than 1%. The company also plans to divest its interests in Solística and other non-core businesses by April 2025, reducing their impact on its consolidated results.

Insights Into FEMSA's Strategic Plans

FEMSA has been gaining pace in the digital space through its tech and innovation unit, Digital@FEMSA, which aims to build a value-added digital and financial ecosystem for both consumers and businesses. This unit also focuses on enhancing and leveraging the strategic assets of FEMSA’s core business verticals.

Coca-Cola FEMSA is at the forefront with its omni-channel approach, while the Proximity division continues to advance digital initiatives within OXXO stores. The company is actively investing in digital offerings, loyalty programs and fintech platforms within its OXXO chains to strengthen its long-term position.

FEMSA’s digital wallet, OXXO Premia, and its loyalty program have shown strong performance. As of the third quarter of 2024, Spin by OXXO reached 12.5 million active users, a 42.2% year-over-year increase. Spin Premia also saw a surge in popularity, with 50.1 million active loyalty users by the end of the same quarter, reflecting a 36.9% increase from the previous year.

FEMSA's third-quarter results showcased solid revenue growth of 8.3% year-over-year, reaching $10 billion, driven by strong performance across all business units. Gross profit increased by 12.1%, with margins expanding thanks to improvements in Health, Proximity Americas and Coca-Cola FEMSA.

The company also reported a 14.6% rise in operating income, reflecting effective cost management and strategic investments. With a robust cash position of approximately $7.9 billion, FEMSA is well-positioned for future growth.

Shares of FEMSA have declined 8.9% in the past three months compared with the industry’s decline  of 3.1%. The company currently has a Zacks Rank #3 (Hold).

Image Source: Zacks Investment Research

Key Picks

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Freshpet FRPT, Vital Farms VITL and The Chef's Warehouse CHEF.

Freshpet, a pet food company, presently sports a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 132.9%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 26.1% and 204.3%, respectively, from the year-ago period’s reported figure.

Vital Farms, which offers a range of ethically produced foods, currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 82.5%, on average.

The Zacks Consensus Estimate for Vital Farms’ current fiscal year’s sales and earnings suggests growth of 26.9% and 88.1%, respectively, from the year-ago reported numbers.

Chef's Warehouse is a distributor of specialty food products in the United States. CHEF presently carries a Zacks Rank #2. CHEF has a trailing four-quarter earnings surprise of 34.4%, on average.

The Zacks Consensus Estimate for Chef's Warehouse’s current financial-year sales and earnings suggests growth of 9.6% and 12.6%, respectively, from the year-ago period's reported figures.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Freshpet, Inc. (FRPT) : Free Stock Analysis Report

The Chefs' Warehouse, Inc. (CHEF) : Free Stock Analysis Report

Vital Farms, Inc. (VITL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research