LoopNet Sell Rating Reiterated

We reiterate our Sell rating on shares of LoopNet (LOOP) following the release of second-quarter financial results. Although the company owns the leading online commercial real estate marketplace, we believe that a challenging near-term operating environment will curtail share price appreciation.

Continuing macro-economic challenges will likely put stress on the commercial real estate sector, in our opinion, as slower economic growth combined with tight access to debt capital may limit transaction activity. Various key operating metrics began to weaken during the second quarter, and we believe that a lower multiple is appropriate at this time.

We expect that transaction volume in the commercial real estate industry will contract in the near-term. Weakening operating fundamentals will likely put pressure on occupancy rates and hinder owners' ability to drive rental rates higher. At the same time, a tight credit market has limited buyers' access to the cheap debt that fueled transactions in recent years.

Combined, we anticipate that these factors will create a wide bid-ask spread, as owners are reluctant to sell at what they consider to be a low-point of the real estate cycle, and buyers are limited in their ability to pay up for properties due to a higher cost of capital.

We note that in its second-quarter release, the company issued non-GAAP earnings guidance, excluding ongoing litigation costs and share-based compensation expenses from its EPS guidance. We believe that this shift away from the company's traditional GAAP earnings guidance was spurred by increasing litigation expenses related to the company's lawsuit against CoStar Group (CSGP), and that the shift may cause some confusion among investors.

We do not consider the litigation expenses to be one-time in nature, and our forward earnings estimates include both litigation and share-based compensation expenses, as is standard.

FEMSA Has Plenty of Pop Left

We are keeping our Buy recommendation on Coca-Cola FEMSA S.A. de C.V. (KOF). The company posted slightly better-than-expected results for the second quarter, and the results in the Mercosur division were particularly impressive. Going forward, we believe new lines of business combined with the recent acquisition will enhance topline growth despite the difficult economic environment throughout the world, including Mexico.

The company is taking necessary steps to become a major player in the non-alcoholic beverage industry in Latin America. Mexican results were upbeat thanks to the introduction of new beverage categories through Jugos del Valle. We are positive on the acquisition of the bottling franchise called Remil in the State of Minas Gerais in South East Brazil. The recent acquisition of Agua de Los Angeles is another step in the right direction.