This week, we are coming back to our guidance trends analyses now focusing on the Mexican Food and Beverage companies. As we have said in previous editions of this guidance series, common guidance metrics 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’ 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).
Food&Bev – Current formal guidance strategy
Source: Company Materials
• Arca Contal stopped giving quarterly guidance in 2020 but used to provide point estimates on consolidated volume growth during the fourth quarter of the year in their earnings results and calls.
• Herdez stopped giving annual guidance after 4Q19, but used to provide directional, range, and point estimate guidance on selective pricing, working capital, net sales growth, profitability margins, and CapEx during the fourth quarter of the year in their earnings calls and presentations.
• Lala stopped giving annual guidance in 2020 but used to provide CapEx ranges in its earnings and corporate presentations, in the first quarter of the year.
What can we read from this table?
- Currently only two out of the 12 players in the Mexican Food&Bev industry provide formal guidance.
- For the companies that do provide guidance, the number of metrics is four in both cases. Sales, EBITDA, and CapEx are provided by both companies.
- Both companies provide guidance through their earnings calls, and one also includes it in earnings presentations.
- Guidance strategies for these companies are based on directional and range estimates. One of them also uses point estimates.
- Both companies that do provide guidance do so quarterly, updating the market regularly as to how in-line their results are with estimated guidance targets.
So, what do the largest food and beverage companies (by market cap) in the world do?
- Nestlé provides quarterly guidance on organic sales growth, underlying trading operating profit margin, and underlying earnings per share. This is communicated through directional and range estimates in their press releases and earnings presentations and calls.
- PepsiCo provides range and point estimate guidance on a quarterly basis in their earnings results and calls. Guidance is given for organic revenue, core constant currency EPS, core annual effective tax rate, and cash returns to shareholders.
- Unilever provides guidance on its underlying sales growth and underlying operating margin every quarter. These are given through their earnings presentations and calls with directional and range estimates.
What should we learn from this?
There is not a big difference in the number of metrics (and the type of metrics) included in guidance strategies for both Mexican companies and the larger Food&Bev global companies. Directional guidance was popular both locally and internationally, which is interesting too.
It seems quite surprising to us that only one sixth of the Food&Bev companies in Mexico are currently providing guidance, considering that many of them have quite liquid and visible stocks. Before the pandemic, almost half of the sector provided guidance, which would be closer to what we would expect to see in a sector like this.
As we have said in the past, we strongly recommend that companies relaunch their guidance strategies as it is very relevant to have a formal positioning on what you see in the future for conversations with investors and analysts.
If you need any help defining your guidance strategy, please let us know. We, at Miranda IR, will be more than happy to help.
Contacts at Miranda Partners