Fomento Económico Mexicano, S.A.B de C.V. (FMX Quick QuoteFMX - Free Report) , also known as FEMSA, is slated to report fourth-quarter 2016 results on Feb 27. The big question facing investors is, whether this leading Latin American beverage company will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company delivered a negative earnings surprise of 31.8%. Moreover, the company lagged the Zacks Consensus Estimate in two of the trailing four quarters, with an average negative surprise of 8.1%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

FEMSA is on track to drive growth through strategic initiatives, which include increasing store count, diversifying business portfolio and focusing on core business activities. Additionally, the company's strong cash flow generation capacity enables it to make incremental investments in business expansion.

However, the company has been struggling, mainly due to currency headwinds, which has been weighing on Coca-Cola FEMSA for a while now. This is well reflected in FEMSA's stock performance that has substantially underperformed the broader industry in the last six months. The stock has declined 18.5% in the past six months, way below the Zacks Categorized Beverages - Soft Drinks industry's fall of 5.8% in the same period.

Further, soft Heineken performance has been a hindrance in the recent past. Additionally, FEMSA has been witnessing strained margins owing to growth of lower-margin businesses. We believe that persistence of these headwinds and regulatory pressure may impact future results.

Further, the Zacks Consensus Estimates for the fourth quarter and 2016 have been witnessing a downtrend ahead of the company’s earnings release. Estimates have declined 13 cents to $1.02 per share for fourth-quarter and 6 cents to $3.12 per share for 2016. Together, these factors make us slightly cautious of the upcoming results.

Earnings Whispers

Our proven model does not conclusively show that FEMSA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: FEMSA currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.02. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: FEMSA currently carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Burlington Stores Inc. (BURL Quick QuoteBURL - Free Report) , scheduled to report earnings on Mar 2, currently has an Earnings ESP of +1.18% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corp. (COST Quick QuoteCOST - Free Report) , slated to report earnings on Mar 2, currently has an Earnings ESP of +0.74% and a Zacks Rank #3 (Hold).

Dollar Tree Inc. (DLTR Quick QuoteDLTR - Free Report) , expected to release earnings on Mar 1, has an Earnings ESP of +0.75% and a Zacks Rank #2 (Buy).

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