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What does guidance in Mexican Construction look like? And what should it look like?

This week, we are coming back to our guidance trends analyses, focusing on the Mexican Construction market. As we have said in our previous guidance analyses, common metrics included in guidance strategies vary from sector to sector, and hence, so do best practices on this matter. The idea is that companies should share the metrics that are most relevant for investors and analysts’ forecasts and model projections.

It is important to note that, as usual, we only consider guidance to be formal guidance if it is properly disclosed, numeric (even if it is a range), and not only broad management comments on a very high-level view of the direction the business is taking. As for the sector classification of companies, we are following the definitions from the BMV (Bolsa Mexicana de Valores).

Construction – Current formal guidance strategy

Source: Company materials

Notes: 

  • Vinte withdrew its guidance in 2020 but used to report a range for revenue growth on a quarterly basis. 

 

What can we read from this table?

  • Currently, four out of the 13 companies in the Mexican Construction sector provide formal guidance. This represents 31% of the sector. 
  • Within those companies that do provide guidance, they all disclose between two or three metrics, with revenues (and/or revenue growth) being the most popular metric. 
  • All these companies include their guidance in their earnings results, and two out of four also disclose it in their earnings presentations or calls. 
  • Three out of four of these players publish their guidance on an annual basis, while the fourth does so quarterly. 
  • A mix of directional and range estimates were given, and one of the companies also offers some directional guidance on certain metrics. 

 

So, what do the largest Construction companies (by market cap) in the world do? 

  • Vinci discloses directional and point estimate guidance on VINCI Autoroutes’s full-year traffic levels, VINCI Airports’spassenger numbers and net income, VINCI Energies’s growth and operational performance, Cobra IS’s revenue and operating margin, VINCI Construction’s operating margin, and VINCI’s overall net income. This is done through press releases on an annual basis, and occasionally in half-year earnings results and/or calls.
  • Scentre Group publishes its annual guidance through press releases and gives quarterly updates on it in its earnings presentations and calls. Its guidance includes ranges on cents per security distributions and revenue growth, as well as directional guidance on earnings.
  • Johnson Controls International provides quarterly guidance on adjusted EPS, organic revenue growth, and adjusted segment EBITDA margin growth. These are disclosed through press releases with directional and range estimates.

 

What should we learn from this?

All the international players provide guidance. The number of metrics and type of estimates shared varied greatly, from two to six metrics, and with directional, range, and point estimates. Two players offer guidance on a quarterly basis, while the third does so annually. This is understandable since it reports its results semi-annually. All three publish their guidance in earnings reports and press releases, and in general, seem to feel comfortable with communicating these estimates. 

Local players vary greatly in size and construction segment, from building highways to housing, and may be part of the explanation as to why many of this industry’s companies don’t share guidance. This contrasts with the international peers, whose scale and operating capacity lead them to offering their perspectives and expectations with the market.

Although we’ve seen other sectors with weaker guidance strategies, the Mexican Construction companies approach still has room for improvement. Ideally, we would like to see disclosures from all companies to help investors and analysts anchor their valuation models.

Notwithstanding size, and although we understand that there are still many macroeconomic uncertainties present, the pandemic’s effects have eased. Hence, investors and analysts are starting to expect companies to return to regular disclosure strategies. We still believe that providing guidance is relevant for all companies who are looking to keep an open and transparent communication with the market, so if it’s your first time planning a guidance strategy or you’d like help relaunching what you had in place before, let us know! We will be happy to help.

Contacts at Miranda Partners

Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com

Ana María Ybarra Corcuera
Miranda-IR
ana.ybarra@miranda-ir.com

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