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Investing.com - HSBC has lowered its price target on Fomento Economico Mexicano (NYSE:FMX) to $112.00 from $122.00 while maintaining a Buy rating on the stock. Currently trading at $87, InvestingPro analysis suggests the stock is undervalued, with analyst targets ranging from $93 to $132.
The price target adjustment comes as FEMSA undergoes what HSBC describes as a "generational leadership transition," with the board expected to announce a new CEO this year. The company has maintained its interim CFO status during this period. Despite the transition, FEMSA maintains solid financials with a healthy current ratio of 1.34 and an Altman Z-Score of 6.62, indicating strong financial stability.
HSBC notes that FEMSA has strong internal executive candidates with successful track records at Oxxo, beverages, and in driving digital transformation. The firm specifically mentions Jose Antonio Fernandez Garza, CEO of the Proximity and Health Division, as a potential candidate.
The current chairman, who has been at the helm for 24 years, is also expected to transition out of the role, creating additional opportunities for executive advancement within the company.
Over the past two years, FEMSA’s board has increasingly aligned with minority shareholders by selling non-core assets and returning capital to shareholders, though HSBC indicates there is "more to do" in this regard. The company has demonstrated strong shareholder commitment with an impressive dividend growth of over 500% and maintains steady revenue growth of 9.8% year-over-year. For deeper insights into FEMSA’s financial health and growth prospects, check out the comprehensive analysis available on InvestingPro.
In other recent news, Morgan Stanley (NYSE:MS) has downgraded Fomento Economico Mexicano from Overweight to Equalweight. This decision comes after the firm highlighted operational concerns and a second-quarter earnings miss. Additionally, Morgan Stanley has significantly reduced its price target for the company from $132.00 to $97.00. The downgrade is part of a response to what Morgan Stanley describes as continued stock underperformance over the past year. These developments are crucial for investors to consider when evaluating the company’s current financial standing.
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