Coca-Cola Femsa Earnings: Healthy Volume and Pricing Buoy Mexico but South America Still a Challenge

We plan to maintain our $87 fair value estimate on wide-moat Coca-Cola Femsa after absorbing the bottler’s second-quarter results. Revenue and adjusted net profit grew 7.2% and 6.5%, respectively, roughly in line with our estimates of 7.0%% and 6.6%. Our 10-year forecast for mid-single-digit sales growth and operating margins averaging 14% remain in place, while we plan to revise our Morningstar Uncertainty Rating to Medium from High in keeping with our quantitative methodology. Following a 4% pop, the stock trades in a range we’d consider fairly valued.