Episode Details

Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Q2 2026 — Coca-Cola FEMSA (KOF), the world's largest Coca-Cola franchise bottler by volume, reported Q2 2026 (quarter ended June 30, 2026) before the open on July 27. All operating figures are in Mexican pesos (Ps.). Revenue rose 4.7% YoY to Ps. 76,318M (+6.6% currency-neutral) on volume +3.5% to a record 1,071.8M unit cases. Gross margin expanded 180 bps to 47.1% (gross profit Ps. 35,938M, +8.8%); operating income rose 9.1% to Ps. 10,654M at a 14.0% margin (+60 bps); adjusted EBITDA jumped 12.1% to Ps. 15,008M; and majority net income surged 16.9% to Ps. 6,211M (EPS Ps. 0.37, per ADS Ps. 29.57), aided by a lower 30.2% tax rate. The story underneath is a divergence: Mexico & Central America (the biggest division, ~Ps. 45.5B revenue, +0.3%) saw operating income FALL ~7% under a sugary-drink excise-tax increase and a soft consumer, while South America (Ps. 30,868M revenue, +11.8%) delivered operating income +46.5% (comparable +49.4%) and EBITDA +35.6% on record Q2 volumes in Colombia (+17.7%), Brazil and Guatemala. The balance sheet is a fortress: net debt fell 14.8% YoY to Ps. 45,030M, net-debt/EBITDA just 0.74x (from 0.89x), interest coverage ~9x. KOF pays a growing ordinary dividend (~2% yield). At ~$108/ADR the stock popped ~5% on the print and sits ~7% below its 52-week high near $116, market cap ~$22.6B. Our owner-earnings DCF (base ~$1.3B/yr FCF, ~$6.20/ADR; steady-staple +5% vs SA-led-compounder +8% paths, 9-11% discount) lands fair value near $110 — essentially at the price. Our call: HOLD, 3/5 — a world-class bottler firing on South America, but the ADR has caught up to its own story; own it for steady compounding + the dividend, add on weakness toward the mid-$90s. Wall Street rates KOF a Strong Buy, yet its own average target (~$106, range $100-$124) sits just below the price — so even the bulls see no upside. We ALIGN: limited near-term upside. Not financial advice. Coca-Cola FEMSA (KOF) is the largest Coca-Cola franchise bottler in the world by volume — a fortress-balance-sheet consumer staple that spans Mexico, Central America and South America, controlled by FEMSA with The Coca-Cola Company a major shareholder. Q2 2026 (ended June 30, all figures in Mexican pesos) was a strong, high-quality beat: revenue Ps. 76,318M (+4.7% YoY, +6.6% currency-neutral) on volume +3.5% to a record 1.07B unit cases; gross margin +180 bps to 47.1%; operating income +9.1% to Ps. 10,654M (14.0% margin); adjusted EBITDA +12.1% to Ps. 15,008M; and majority net income +16.9% to Ps. 6,211M. But the headline hides a divergence: Mexico & Central America — the biggest division (~60% of revenue) — grew just 0.3% and its operating income FELL ~7% under a sugary-drink excise-tax increase and a cautious consumer, while South America (Brazil, Colombia, Argentina, Uruguay) surged, with operating income +46.5% on record Q2 volumes (Colombia +17.7%). The diversified footprint did its job. The balance sheet is a fortress: net debt down 14.8% to Ps. 45,030M, net-debt/EBITDA just 0.74x, ~9x interest coverage, and a growing ~2%-yield dividend. The two risks a US staple doesn't carry: a squeezed Mexican core market, and the Mexican peso — reported growth trails currency-neutral (revenue +4.7% vs +6.6%), and long-run peso weakness is a quiet tax on a dollar ADR holder. And the price: at ~$108 the ADR popped ~5% on the print and sits near its 52-week high (~$116). Our owner-earnings DCF — base ~$1.3B/yr FCF (~$6.20/ADR), a steady-staple +5% path vs a South-America-led +8% compounder path, discounted 9-11% — lands fair value near $110 per ADR, essentially where it trades. Our call: HOLD, 3/5 — a genuinely excellent business whose ADR has caught up to its own story; own it for the compounding and the dividend, and add on real weakness toward the mid-$90s where a margin of safety returns. Wall Street rates KOF a Strong Buy, yet its average target (~$106, range $100-$124) sits just below the price — the ratings say buy, but