Breaking Down Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Financial Health: Key Insights for Investors

You're looking at Coca-Cola FEMSA, S.A.B. de C.V. (KOF) right now, and the numbers tell a story of resilience in a tricky market. The consensus is a Moderate Buy with an average price target of $104.00, but you need to understand the moving parts that get us there. The company is defintely showing top-line strength, with the full-year 2025 revenue projected to hit a massive 301.74 billion pesos (MXN), driven by smart revenue management and pricing initiatives across South America, which saw revenue jump 8.7% in Q3 alone.

But here's the quick math: while the full-year Earnings Per Share (EPS) is forecast at 116.58 pesos, the volume story in their core market, Mexico, is a headwind, declining 3.7% in the third quarter. This is a classic case of pricing power offsetting volume softness, but what this estimate hides is the looming shadow of the 87% increase in Mexico's excise tax (a tax on production or sale of a specific good, like soft drinks) coming in 2026. That tax will pressure cash flow, so we need to see how their digital adoption, like the Juntos+ Advisor tool, can keep operating margin expansion-which was 50 basis points in Q3-on track.

The company has a strong foundation, but the near-term future is about navigating regulatory risk and leveraging their affordability platform. It's a bottling giant, but it's not immune to local politics.

Revenue Analysis

You need to know if Coca-Cola FEMSA, S.A.B. de C.V. (KOF) is still growing, and the short answer is yes, but the growth is uneven. For the last twelve months ending September 30, 2025, the company generated total revenue of approximately Ps. 289.90 billion, marking an 8.34% year-over-year increase. Still, the third quarter of 2025 (3Q25) showed a more modest consolidated revenue growth of 3.3%, which tells you the pricing power is there, but volume is a challenge in some key markets.

The core business model is straightforward: KOF is a bottling and distribution powerhouse, and its revenue streams reflect that. The vast majority of their income-over 99%-comes from the sale of products, primarily beverages. This includes the full range of Coca-Cola trademark products, plus their own brands of flavored waters and juices. They are not a diversified conglomerate; they are defintely a beverage pure-play.

Here's the quick math on where the revenue is coming from, focusing on the two main geographical segments for 3Q25:

• Mexico & Central America: This segment pulled in roughly Ps. 42.5 billion in 3Q25 revenue.
• South America: This region contributed Ps. 29.4 billion to the 3Q25 total.

The difference in growth between these two halves is the real story for 2025. While South America saw a strong revenue increase of 8.7% (or 12.5% on a currency-neutral basis) in 3Q25, the Mexico & Central America segment actually saw a slight revenue decline of 0.2%. This regional divergence is crucial for your investment thesis.

The significant change you need to track is the impending regulatory risk in their largest market. The Mexican House of Representatives approved a substantial increase in the excise tax on sugar-sweetened beverages, hiking it from Ps. 1.64 to Ps. 3.08 per liter, plus introducing a new tax on non-caloric sweeteners. This is a massive headwind that will weigh on Mexican volume performance in 2026, so KOF is already focusing on revenue management initiatives (RGM) to offset it through strategic pricing and mix management.

On the opportunity side, their digital B2B omnichannel platform, Juntos+, is a significant lever for future revenue efficiency and growth, helping them manage pricing and promotions more effectively. This is a critical move to protect margins against rising costs and new taxes. For a deeper look at who is betting on KOF's ability to navigate these changes, you should be Exploring Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Investor Profile: Who's Buying and Why?

Here is a summary of the 3Q25 revenue performance by region:

Action: Finance needs to model the full impact of the new Mexican excise tax on 2026 volume and revenue forecasts by the end of the year.

Profitability Metrics

You need to know if Coca-Cola FEMSA, S.A.B. de C.V. (KOF) is just generating revenue or if it's converting that revenue into real profit efficiently. The short answer is: KOF is successfully defending its operating margin through cost control, even as its gross margin faces pressure from promotional activity and mix changes. This is a classic sign of a well-managed bottler.

For the first nine months of the 2025 fiscal year, KOF reported total revenues of Ps. 213,984 million, a 5.0% increase year-over-year. But the real story is in the margins-the percentages that tell you how much of each revenue dollar they keep at different stages of the income statement. Here's a quick look at the key profitability ratios for the third quarter (Q3) of 2025:

The gross profit margin, which is revenue minus the cost of goods sold, contracted by 100 basis points (bps) to 45.1% in Q3 2025. This contraction is a near-term risk, driven primarily by a non-favorable product mix and the need for increased promotional activity, especially in the challenging Mexican market. This is the cost of fighting for market share in a softer macroeconomic environment.

Still, their operational efficiency is defintely strong. The operating margin actually expanded by 50 bps to 14.3% in Q3 2025. How? The company is executing on cost management, offsetting the gross margin pressure through expense efficiencies in areas like freight and marketing. This is where decades of experience as a large-scale bottler really pays off: they know how to find savings below the gross profit line.

When you look at the bigger picture, KOF's net profit margin remains steady at around 8.2%, which aligns with the Q3 2025 performance. Over the past five years, KOF has delivered a consistent annual earnings growth rate of 17.2%, a powerful trend that shows their model works across different economic cycles. This kind of consistency is what separates a good investment from a speculative one.

In terms of industry comparison, KOF's margins are generally healthy for a bottling operation, which typically operates on tighter margins than the concentrate producers (like The Coca-Cola Company). While the non-alcoholic beverage industry faces a prevailing trend of narrow profit margins, KOF's ability to maintain a gross margin in the mid-40s and an operating margin in the low-to-mid teens is a competitive advantage. For context, the company's Price-to-Earnings (P/E) ratio of 14.3x trades far below the beverage peer group average of 64.2x, which suggests a favorable valuation relative to its consistent earnings quality. You are getting margin stability at a discount.

Near-term, watch these two things:

• Gross Margin: Has promotional activity peaked? If it continues to contract from the Q3 45.1%, it signals deeper consumer weakness.
• Volume vs. Pricing: The Q3 volume declined 0.6%, but revenue grew 3.3%. This means KOF is relying on price and mix management (revenue management initiatives) to drive the top line.

For more detailed analysis of KOF's debt structure and valuation, check out Breaking Down Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You want to know how Coca-Cola FEMSA, S.A.B. de C.V. (KOF) funds its growth, and the answer is clear: they rely on a conservative, debt-centric capital structure that is highly manageable. The company's financial health is defintely strong, showing a preference for stable, long-term debt over diluting shareholder equity, which is a smart move for a capital-intensive bottler.

As of June 2025, Coca-Cola FEMSA's total debt stood at approximately $4.50 billion USD. Most of this is long-term, which is what you want to see. Specifically, the long-term debt was about $3.975 billion as of September 30, 2025, showing a deliberate strategy to lock in funding over extended periods. This is a business built on long-term contracts and infrastructure, so long-term financing makes sense.

Leverage and Industry Benchmarks

The key metric here is the Debt-to-Equity (D/E) ratio, which measures how much debt a company uses to finance its assets relative to the value of its shareholders' equity (financial leverage). Coca-Cola FEMSA's D/E ratio as of September 30, 2025, was remarkably low at just 0.5866.

Here's the quick math: for every dollar of shareholder equity, the company uses less than 60 cents of debt. This is exceptionally conservative, especially when you compare it to the industry. The average D/E ratio for the Soft Drinks & Non-alcoholic Beverages sector in 2025 is around 1.023. Coca-Cola FEMSA is operating with significantly less leverage than its peers, meaning it has a much larger cushion against economic downturns.

• KOF D/E Ratio (Sept 2025): 0.5866
• Beverage Industry Average D/E: 1.023
• Net Debt to EBITDA (June 2025): 1.00x

Recent Capital Activity and Credit Strength

The company is very well-regarded by credit rating agencies, which is a direct result of this low leverage. In April 2025, S&P Global Ratings assigned an 'A-' issue rating to a proposed issuance of senior unsecured notes of up to $750 million. This is investment-grade territory, indicating a low risk of default. The company also successfully issued an international bond of $500 million with a 5.1% coupon maturing in 2035 in May 2025.

This debt is used strategically for general corporate purposes, including capital expenditures and debt repayment, not just to plug holes. It's a sign of a healthy company using cheap, high-rated debt to fuel expansion. The maturity profile is also favorable, with approximately 96.4% of its debt being long-term as of the third quarter of 2024, minimizing near-term refinancing risk. The interest coverage ratio sits at a healthy 9.0 times, meaning their earnings before interest and taxes (EBIT) can cover their interest expense nine times over. That's a fortress balance sheet.

The balance is clearly tilted toward debt financing because it is cheap and readily available to a company with such a strong credit profile. They are essentially choosing to use a low-cost capital source (debt) over a higher-cost one (equity, which involves dilution and higher investor return expectations). This capital allocation discipline is a major plus for shareholders. To see how this strong financial base translates to investor interest, you should read Exploring Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

When you look at a company like Coca-Cola FEMSA, S.A.B. de C.V. (KOF), the first thing we check is its immediate ability to cover its bills-its liquidity. This tells us if a business can handle its near-term obligations without scrambling to sell off long-term assets. For KOF, the picture as of the third quarter of 2025 (Q3 2025) is solid, but it's not without a classic bottling industry caveat.

The core metrics, the Current Ratio and Quick Ratio (also known as the acid-test ratio), give us a precise measure of this short-term financial health.

• Current Ratio: At Q3 2025, KOF's Current Ratio was approximately 1.10 (Ps. 77,126.66 million in current assets divided by Ps. 70,339.47 million in current liabilities). A ratio above 1.0 is the goal, meaning current assets exceed current liabilities. KOF is comfortably there.
• Quick Ratio: This is the stricter test, excluding inventory. KOF's Quick Ratio was about 0.90 (Ps. 77,126.66 million current assets minus Ps. 13,908.95 million inventory, divided by current liabilities).

The Quick Ratio of 0.90 is slightly below the ideal 1.0, but for a consumer staples company like KOF, this is defintely not a concern. Their inventory-bottled beverages-is highly liquid and moves fast. They can turn that inventory into cash quickly.

Working Capital and Cash Flow Trends

The absolute measure of short-term strength, the working capital (current assets minus current liabilities), stood at a positive Ps. 6,787.19 million as of Q3 2025. This positive balance gives management operational flexibility, allowing them to reinvest in the business or manage unexpected costs without immediately seeking outside financing. Working capital is the engine of day-to-day operations.

Looking at the cash flow statement for the trailing twelve months (TTM) ended September 30, 2025, shows how this working capital is generated and used.

Here's the quick math: Operating Cash Flow (OCF) of Ps. 32,494 million is robust, showing the core business is a cash machine. However, the Investing Cash Flow (ICF) is a significant outflow-Ps. 23,785 million in capital expenditures alone. This is typical for a capital-intensive business that must constantly upgrade bottling plants and distribution fleets. It's a necessary spend to maintain their Mission Statement, Vision, & Core Values of Coca-Cola FEMSA, S.A.B. de C.V. (KOF).

Near-Term Risks and Opportunities

The primary near-term risk to KOF's liquidity is external: the potential increase in the excise tax on sugar-sweetened beverages in Mexico, which was pending Senate approval in late 2025. If approved, this tax hike could drive a low-to-mid single-digit volume decline in 2026, directly impacting OCF. Management is already planning to rephase or reduce 2026 CapEx to mitigate this, which is a clear, proactive action.

The opportunity lies in their disciplined cost control and hedging strategies. KOF has hedged over 90% of sweeteners, 75% of PET, and 65% of aluminum for the rest of the year, which shields their cost of goods sold from volatile commodity prices. This financial discipline is what keeps their liquidity ratios stable even in a challenging environment.

Valuation Analysis

You are looking at Coca-Cola FEMSA, S.A.B. de C.V. (KOF) and wondering if the market has finally caught up to its value after a strong run. The short answer is: the stock looks fairly valued to slightly undervalued right now, but the margin of safety is getting defintely tighter.

The company's stock has delivered an impressive total return of approximately 18% over the last year, reflecting solid operational momentum, especially in Mexico and Brazil. Still, the current stock price of around $87.97, as of mid-November 2025, sits below its 52-week high of $101.74, which tells you there is still room for a move up, but you need to understand the multiples.

Is KOF Overvalued or Undervalued?

To gauge the valuation, we look at three key ratios. For the 2025 fiscal year, Coca-Cola FEMSA's metrics suggest a reasonable valuation relative to its historical performance and the broader consumer staples sector. Here's the quick math on where KOF stands:

• Price-to-Earnings (P/E) Ratio: At approximately 14.35, KOF trades at a discount to the S&P 500 average, which is typical for a mature, non-cyclical beverage bottler.
• Price-to-Book (P/B) Ratio: The P/B is about 2.40, which is healthy. This multiple shows you are paying a reasonable price for the company's net assets, a good sign of value stability.
• Enterprise Value-to-EBITDA (EV/EBITDA): This multiple, which is capital structure-neutral (meaning it ignores the mix of debt and equity), stands at around 7.89x. This is a solid number for a company with KOF's market position, indicating the enterprise value is not overly inflated compared to its operating cash flow generation before non-cash charges.

What this estimate hides is the potential for margin expansion from strategic capacity investments and supply chain adjustments, which some analysts believe could drive the fair value higher. If you want to dive deeper into who is buying and why, you can check out Exploring Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Investor Profile: Who's Buying and Why?

Dividends and Analyst Outlook

KOF remains an attractive stock for income-focused investors. The company offers a current dividend yield of approximately 3.94%. Plus, the dividend payout ratio, based on the trailing twelve months of earnings, is a sustainable 62.54%. This low-risk payout suggests the company has plenty of earnings left over to reinvest in the business while still rewarding shareholders.

The Wall Street consensus on Coca-Cola FEMSA is split, but largely positive. The average analyst rating is a 'Moderate Buy' to 'Hold,' reflecting the stock's recent price appreciation. The average 12-month price target is approximately $104.00, suggesting a potential upside of over 17% from the current price. The targets range from a low of $98.00 to a high of $109.00, indicating that while a significant portion of the market sees value, the most bullish forecasts suggest a 20% undervaluation.

Risk Factors

You need to know that for Coca-Cola FEMSA, S.A.B. de C.V. (KOF), the biggest near-term risk isn't just competition; it's a regulatory headwind in its largest market, Mexico, coupled with persistent margin pressure from costs. The company is defintely a resilient operator, but these factors will test its pricing power through 2026.

The core challenge is a mix of external market conditions and internal cost dynamics that squeeze profitability. Look at the third quarter of 2025: consolidated volume declined by 0.6%, but the company still managed to increase total revenue by 3.3% to MXN 71.9 billion through pricing and revenue management initiatives. Still, the underlying cost pressures are clear.

Regulatory and External Market Risks

The most significant external risk is the regulatory change in Mexico. The government approved an 87% increase in the excise tax on soft drinks, a move that will hit consumption hard. Management has already forecasted a low to mid-single-digit volume decline in Mexico for 2026 because of this. This isn't a minor tweak; it's a major price shock to consumers in KOF's core market.

Also, macroeconomic instability across Latin America remains a constant threat.

• Currency Volatility: The depreciation of the Argentine peso and other Central American currencies creates unfavorable currency translation effects, which can erode reported revenues in Mexican Pesos (MXN).
• Consumer Sentiment: A softer macroeconomic backdrop in Mexico and short-term consumer saving adjustments in Guatemala-due to concerns over remittances-are directly impacting volume performance in those key regions.

Operational and Financial Risks

The financial reports for 2025 show a clear struggle to maintain margins despite strong top-line growth. This is the operational risk you need to focus on.

In Q3 2025, the consolidated gross margin contracted by 100 basis points to 45.1%. Here's the quick math on what's causing the squeeze: higher fixed costs like labor and depreciation, plus increased promotional activity to defend market share against competitors. Even though the company's operating income increased 6.8% to MXN 10.3 billion in Q3 2025, that growth was largely driven by expense efficiencies and a favorable operating foreign exchange gain, not just pure operational leverage.

What this estimate hides is the regional divergence. While South America is showing resilience, the Mexico and Central America division saw its gross margin contract by 110 basis points to 47.5% in Q3 2025, largely due to unfavorable mix and promotional spending.

Mitigation Strategies and Clear Actions

The good news is that management is not sitting still; they are executing a clear, multi-pronged strategy to counter these risks.

They are also investing heavily in their digital platform, Juntos+, which has helped them defend volume and improve customer reach. The success of products like Coca-Cola Zero, which grew 23% year-over-year in Q3 2025, is a strategic silver bullet against the sugar tax risk.

For a deeper dive into the company's valuation and long-term outlook, you should read the full post: Breaking Down Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking at Coca-Cola FEMSA, S.A.B. de C.V. (KOF) and asking where the next leg of growth comes from, especially with some regional volume softness. The quick answer is: digital efficiency and strategic pricing power in high-growth South American markets. They are defintely not relying on just volume growth anymore.

For the full 2025 fiscal year, the consensus revenue estimate sits at approximately MXN $299.01 billion, with earnings per share (EPS) projected around MXN $11.54. This implies a revenue growth forecast in the mid-to-high single digits, with some analysts projecting annual revenue growth up to 7.84%. This growth isn't explosive, but it's consistent, which is exactly what you want from a defensive consumer staple stock.

Here's where that growth is actually being engineered:

• Digital Transformation (Juntos+): This omnichannel commercial platform is KOF's biggest margin lever. Adoption is already at about 60% of customers, and the continued rollout toward 80% is expected to yield another 20-60 basis-point gain in gross margins over the next 18 months. In Brazil, this has already boosted route efficiency from 85% to 96%, a huge logistics win.
• Product Innovation & Mix: The company is aggressively pushing higher-margin, low- and no-sugar products. Coca-Cola Zero Sugar is a key driver, having achieved a remarkable 31% volume growth in 2024. They are also expanding their profitable non-carbonated beverages (NCBs) like water, energy drinks, and isotonic beverages, diversifying away from traditional sparkling drinks.
• Geographic Diversification: While Mexico has seen some volume decline, the South American markets are stepping up. For instance, in Q1 2025, Brazil and Argentina delivered volume growth of 14.4% and 17.9%, respectively. This geographic balancing act-plus the strategic integration of the Philippines platform-provides a crucial hedge against single-market or currency volatility.

The core competitive advantage for Coca-Cola FEMSA is its sheer scale and distribution network, which is Latin America's largest. This scale grants them a gross margin that is roughly 10% higher than their regional beverage peers. They use this advantage to implement a dual strategy: disciplined pricing (revenue management) to boost top-line growth and a focus on affordability platforms in markets like Mexico, often using returnable packaging to keep products accessible to consumers facing macroeconomic headwinds.

The strategic roadmap is clear: use digital efficiency to expand margins, and use geographic and product diversification to stabilize the top line. This is a story of operational leverage, not just volume. You can read more about the core financial picture in Breaking Down Coca-Cola FEMSA, S.A.B. de C.V. (KOF) Financial Health: Key Insights for Investors.

To summarize the near-term financial picture, look at the consensus estimates for 2025 and 2026:

What this estimate hides is the risk of currency fluctuations and persistent inflation in key markets, which KOF must continue to offset with their pricing and efficiency gains. Your action here is to monitor the adoption rate of Juntos+ and the volume/mix performance in Brazil and the Philippines; those are the real indicators of future margin expansion.