KOF: Higher Mexico Beverage Tax Will Support Future Upside Potential

Analysts have trimmed their price target on Coca-Cola FEMSA to about $104 from roughly $110, citing modestly lower growth expectations but reaffirming that Mexico's higher beverage excise tax on Oxxo sales should have limited impact and could even prove slightly positive for revenue.

Analyst Commentary

Analysts covering Coca-Cola FEMSA have modestly reduced their price targets while largely maintaining a constructive stance on the stock, highlighting both resilient fundamentals and emerging risks around taxation and growth normalization.

Bullish Takeaways

• Bullish analysts emphasize that the higher beverage excise tax on Oxxo sales in Mexico is not expected to have a material impact on volumes or top-line performance, supporting a resilient earnings outlook.
• Some see the tax change as potentially slightly positive for revenue, suggesting management can pass most of the incremental cost through to prices without eroding demand, which supports margin stability.
• The retention of Overweight ratings alongside the reduced price targets signals continued confidence in execution and in the long-term growth framework, even under a more conservative macro backdrop.
• Updated valuation work still suggests upside from current trading levels, with analysts pointing to Coca-Cola FEMSA's scale, pricing power, and defensive beverage portfolio as key supports for the equity story.

Bearish Takeaways

• Bearish analysts point to the step down in price targets, from prior levels above $110 toward the $100 to $105 range, as evidence that growth expectations are being recalibrated lower.
• There is caution that repeated tax adjustments, even if individually manageable, could cumulatively pressure affordability over time and limit volume growth in more price-sensitive consumer segments.
• Some see less room for multiple expansion in the near term, arguing that the shares already reflect much of the company's operational strengths and defensive profile.
• Execution risks around further regulatory changes and potential cost inflation are cited as reasons to temper expectations for rapid earnings acceleration, which could limit the pace of re-rating even with supportive long-term fundamentals.

What's in the News

• Coca-Cola FEMSA, S.A.B. de C.V. announced a quarterly dividend of USD 0.8996 per share, reflecting an increase in shareholder returns. (Key Developments)
• The dividend will be payable on October 27, 2025, providing a specific timeline for investors to receive cash distributions. (Key Developments)
• The ex-dividend and record dates are both set for October 14, 2025, establishing the cutoff for shareholders to qualify for the upcoming payout. (Key Developments)

Valuation Changes

• Fair Value: Fallen slightly, from about $110.03 to roughly $103.88 per share, reflecting a modestly more conservative outlook.
• Discount Rate: Unchanged at 8.88 percent, indicating no shift in the assumed risk profile or cost of capital.
• Revenue Growth: Trimmed marginally, from approximately 6.19 percent to about 6.12 percent, signaling slightly lower long term growth expectations.
• Net Profit Margin: Risen very slightly, from around 8.68 percent to about 8.68 percent, suggesting a small improvement in projected profitability.
• Future P/E: Reduced modestly, from roughly 18.15x to about 17.00x, implying a somewhat lower valuation multiple on forward earnings.