Mexico Equity Research: 1Q25 - Mostly unshattered

Despite currently soft conditions, with most of the 1H25 noise in the rearview mirror and an expectedly better 2H, most of the companies left their guidance unchanged. Outliers were Bimbo (Market Perform) and Volaris (Outperform), both lowering their expectations. Bimbo lowered its sales growth outlook (to high-single-digit growth vs previously double-digit), and is now expecting a margin contraction (vs margin expansion previously expected). Nonetheless, their new guidance is closer to our previous estimates and we thus leave our estimates, rating and PT, mostly unchanged. In Volaris, the company reduced its ASMs guidance (lowering the growth rate to 8% from 13%). Furthermore, Volaris retired its EBITDAR margin guidance, considering low visibility in their booking curve for YE (our current estimate is 31.1%). As a result, we reduced our PT to P$12 from P$25, while our Outperform rating was reiterated, supported in VOLAR’s attractive valuation.

In 1Q25, in Consumer managed a soft consumer environment that weighed on results, as expected; a cooler season didn’t help either. While some companies did start to see an improvement in late 1Q25-early 2Q25, a meaningful trend across all covered companies is not identified. Companies in the meantime are focusing on cost efficiencies and battling competitive pressures, as pricing —and traffic for retailers—is the main driver yet limited by consumers’ elasticity. Still, companies stuck to their guidance —with Bimbo the only exception—, as they wait for a better 2H25, not impacted by calendar and spending tough comps. (Consumer report here)

In Cement, although the environment was challenging, the Cement companies under coverage reiterated their 2025 guidance, anticipating a gradual improvement in EBITDA during 2H25el. Total revenues in 1Q25 for the sector dropped 8%, while total EBITDA was down 17% YoY. In that context, GCC posted the lowest EBITDA margin contraction (-0.6 pp), while CEMEX's EBITDA performance accounted for an 18% YoY drop, resulting in a 2.1 pp contraction in its EBITDA margin (report here). In the Transport sector, companies under coverage posted another positive quarterly result. However, a better tariff environment and diversified revenues were not enough to compensate for margin contractions (report here). Lastly, in the Housing sector, total revenues gained 7% YoY. In contrast, we observed some pressure at the EBITDA level. VINTE posted positive results, with double-digit growth at the EBITDA level. ARA’s results remain solid, with a 16% YoY gain in total sales and a 4% YoY rise in EBITDA in 1Q25. (report here)

Going forward, we expect some companies to continue considering a guidance revision in coming months. As calendar headwinds fade away, 1H25 performance should give them more visibility on whether conditions are weaker than expected. On the other hand, the tariffs’ noise remains, yet our covered companies are mostly unaffected.