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Investing.com - Barclays (LON:BARC) has downgraded its outlook on Mexican equities, citing persistent tariff uncertainties and limited upside potential despite the market’s strong year-to-date performance.
Mexican stocks have outperformed major indices with the Mexbol IPC gaining 23.5% year-to-date in USD terms compared to the S&P 500’s 6.5% increase, according to Barclays’ analysis. This outperformance has occurred despite what the investment bank describes as a "lackluster Mexican economy."
The investment bank notes that companies in its Mexican coverage are trading at approximately 7x EV/EBITDA, slightly below their 10-year average, with an average upside potential of only 19%. Barclays believes these valuations are starting to fully reflect the earnings potential of these companies.
Tariff concerns remain a key issue for Mexican equities, with President Trump’s threat of 30% tariffs creating ongoing uncertainty. While the Mexican stock market has shown resilience to these threats, Barclays warns that "a prolonged wait-and-see approach could erode Mexico’s medium-term EPS growth potential."
For the second quarter of 2025, Barclays projects companies in its coverage will see average revenue growth of 9%, EBITDA growth of 7.5%, and EPS growth of 9%, with the covered stocks trading at 6.9x EV/2025 EBITDA and 12.8x P/E while offering an estimated dividend yield of 3.9%.
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