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On Monday, Morgan Stanley (NYSE:MS) analysts upgraded Coca Cola Femsa (NYSE: KOF) stock rating from Equalweight to Overweight. The analysts highlighted several factors contributing to this decision, including the anticipated earnings resilience driven by Mexico’s second-half inflection, strength in Brazil, and favorable hedges. The upgrade aligns with the company’s strong fundamentals - InvestingPro data shows an impressive financial health score of "GREAT" and consistent revenue growth of 13.7% over the last twelve months.
The analysts expressed confidence in Coca Cola Femsa’s performance, noting that the company’s perceived defensiveness and year-to-date underperformance relative to the BMV index present an investment opportunity. They anticipate an inflection point as comparisons ease and market share gains resume, particularly in Mexico, which accounts for approximately 50% of the company’s EBITDA of $2.38 billion. The analysts project a significant volume rebound in Mexico in the second half of the year, which they believe will positively influence stock sentiment. This outlook is supported by the company’s robust gross profit margin of 46.2% and its 22-year track record of consistent dividend payments.
Coca Cola Femsa’s exposure to South America, accounting for around 40% of EBITDA, is also viewed favorably by the analysts. They cited consumer resilience in Brazil and easing comparisons as contributing factors, while Argentina continues its recovery. A detailed analysis of costs, including a 20% year-to-date reduction in sugar prices in Mexico and a 16% decrease in PET futures for the second half of 2025, supports the assumption of EBITDA margin expansion.
The analysts project a compound annual growth rate of approximately 4% for EBITDA in USD terms from 2024 to 2026, compared to around 1% for their Mexico Food coverage. They believe the market is overlooking Coca Cola Femsa’s resilient business model and potential for an inflection point in the latter half of 2025 and into 2026. The new price target is set at M$222, implying a trading multiple of approximately 15.5 times, in line with historical averages, and offering a potential upside of 20%, along with a dividend yield of around 4.5%. According to InvestingPro analysis, the stock appears slightly undervalued at its current price of $95, with additional insights available in the comprehensive Pro Research Report, part of the analysis covering 1,400+ top US equities.
In other recent news, Coca-Cola (NYSE:KO) FEMSA has filed its annual report for the fiscal year ending December 31, 2024, with the U.S. Securities and Exchange Commission (SEC). This filing includes the company’s audited financial statements and is available on its website for investors. In addition, Coca-Cola FEMSA held its Annual General Shareholders’ Meeting, where shareholders approved a cash dividend totaling Ps. 15,462 million for the 2024 fiscal year. This dividend will be distributed in four equal installments throughout 2025.
The shareholders also ratified the appointment of the Board of Directors and various committee members for the year 2025. Coca-Cola FEMSA has also submitted a Form 6-K to the SEC for May 2025, which includes an underwriting agreement related to the issuance of securities. This filing ensures Coca-Cola FEMSA’s compliance with SEC regulations, providing transparency and regular updates to investors.
These developments highlight Coca-Cola FEMSA’s ongoing commitment to regulatory compliance and shareholder engagement. The company continues to emphasize transparency through its detailed financial disclosures and strategic decisions.
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