Consumer Spec - Pre Market Wrap
CAKE (+), KO (+), MDLZ (+), PG (−), VFC (−), CAR (−) Report | NKE China DTC, ULTA vs Amazon Beauty
Consumer pre-market skews mixed in a FOMC day and more Iran headlines. EU consumer sectors are trading -0.9/ -1.1% and crude spiking +6% which are not positive datapoints for a broad factor rotation into the sector as we experienced in the past few days and more so yesterday (XRT +2.2%, XLP +2% while SPX basically flat).
CAKE printed a blowout 2Q — SSS +5.8%, guidance raised — flipping Morgan Stanley to Equalweight even as Jefferies fades the move to Hold. KO's 7% organic beat drew fresh PTs to $100, World Cup and hot-weather tailwinds still humming. Packaged food stays two-speed — MDLZ volumes surprised with reinvestment building toward 2027, while PG's flat organic and soft guide underscore a slower turnaround.
Elsewhere, CAR cratered -12% on pricing softness, VFC slipped as Vans lags, and NKE braces for low-teens China decline. ULTA held firm on BofA's reaffirmed Buy.
MACRO & MARKETS
NOTABLE QUOTES FROM EARNINGS CALLS
Great highlights as always from BofA consumer specialist team:
VISA: “Growth across consumer spend. Saw incremental improvement from Q2, with the highest spend band continuing to grow the fastest across our volume. Both discretionary and non-discretionary spend remained strong. We do not see signs of the lower spend consumer weakening in our volumes.”
VISA: “A step down from June, primarily due to retail, including the timing of promotional shopping events. The lack of a days mix benefit that helped June and the change in the cost of fuel.”
MONDELEZ: “We feel quite confident in telling you today that earnings for 2027 is going to be strong.”
MONDELEZ: “I would say that consumer confidence in North America has rebounded from lows, but it remains very subdued. There is still inflation. There are energy prices that continue to put pressure. We see this case-shaped growth where you have consumers on one hand going to value formats and channels where prices are lower, yet at the same time better-for-you and premium options are doing well.”
CHEESECAKE FACTORY: “We definitely are seeing a pickup in younger guests and some of our own internal research that we’ve looked at. We know that younger guests are returning to malls.”
COCA-COLA: “The economy is strong in many places, yet many consumers face inflationary pressures, geopolitical uncertainty, and economic challenges. They are evaluating how they shop, what they value, and what they want to put in their basket. In markets like the US and Europe, the consumer backdrop is stable in aggregate, but many remain under pressure. In China, sentiment remains cautious and spending continues to be selective.”
COCA-COLA: “ … while they remain participating in the industry the lower income continues to be pressured and we see that it’s really about value, not only pricing.”
COCA-COLA: “We actually had the highest incidence of beverages in the World Cup ever. We’ve got around 80%, which represents roughly close to one drink per attendee at the venues.”
ROYAL CARIBBEAN: “ … we continue to see engaged consumers who prioritize travel and experiences. Travel remains the number one leisure category where consumers intend to spend more … The ongoing geopolitical situation has affected near-term travel plans for some consumers, primarily preferring closer destinations over international trips due to the cost of air travel. Consumers tell us that they are looking closer in due to flexibility and ease, which is reflected in the strong, close-in booking volumes we have been seeing.”
ROYAL CARIBBEAN: “ … we’re seeing about 180,000 people on any given day spend. And so seeing elevated spend, while they’re on the ship is obviously a good sign or good indicator of the health of the consumer, or at least our guests that sail with us each and every day … you’ve seen an increase in spend in beverage, as an example, and shore excursions … we’re in July, so it’s early, but we have seen a very strong demand for 2027. So as we said, they’re at historical, which are very, very high volumes. So our booking volumes are in a great place.”
Source: Company transcripts via Bloomberg.
INTERESTING COMMENT ON K-SHAPE NARROWING THEME
another highlight from yesterday BofA spec team
From Hilton earnings report:
“I think we are seeing the bottom and the mid, the middle class is getting back in the game and all these midscale, upper midscale, everything that has been fairly weak over the last couple of years is really strengthening. It is really impossible to deny. We continue to see it by the way, going into the third quarter, we continue to see it post-World Cup … Into the third quarter, we continue to see really good strength and rate. We continue to see really good strength in midweek business, transient, really good strength in SMB, all the things that we are talking about. I think this C shape thing’s alive and well. I think it’s personally I think it’s sustainable, just based on the basic laws of economics.”
CONSUMER STREET RESEARCH
Upgrades
Cheesecake Factory (CAKE) Raised to Equal-Weight at Morgan Stanley
Downgrades
Caesars Entertainment (CZR) Cut to Hold at TD Cowen; PT $31
Cheesecake Factory (CAKE) Cut to Hold at Jefferies; PT $88
Initiations
No initiations in consumer sector today
EARNINGS REPORTS
CAKE +3.5%: BLOWOUT 2Q BEAT, GUIDANCE RAISED, SSS ACCELERATING, ESTIMATES AND PRICE TARGET LIFTED, REVISION CYCLE CONTINUING
EPS $1.44 vs Street $1.18 — well ahead, driven by Cheesecake-brand SSS +5.8% (vs +2.2% est) and consolidated restaurant margin 17.6% (vs 16.7%). North Italia SSS -3% was below Street’s -1.5%; G&A/D&A slightly above cons offset by favorable taxes (net neutral).
FY26 guidance raised: revenue to ~$4B (from $3.91B) vs Street $3.93B; net income margin to ~5.4% (from ~5%) vs Street 5.0%, implying EPS ~$4.36 vs Street $4.09.
3Q26 outlook well above Street: revenue $980–990M (vs Street $946M), NI margin ~4.3% (vs 3.4%), implied EPS ~$0.84 vs Street $0.67; implied Cheesecake SSS +7% vs Street +1.8%, restaurant margin +115bps to 15.6% vs Street 14.8%.
Opco summarizes the report well and we think the stock should react well today.
CAKE delivered an outstanding quarter and raised its '26 sales/margin guidance. SSS in 2Q26 (+5.8%) outpunched elevated expectations, with management anticipating accelerating momentum for 3QE (to +7% range vs. Street's +1.8%). As we analyze the outlook, we continue to identify pockets of conservatism and believe this positions the model for an ongoing positive revision cycle.
PG -2.6%: EPS BEAT ON BELOW-LINE ITEMS, ORGANIC SALES MISSED, SOFT 2027 GUIDANCE SIGNALS SLOWER TURNAROUND AHEAD
EPS $1.43 vs cons $1.41 — a $0.02 beat, but TD Cowen flags it came entirely from below-the-line factors.
Organic growth 0% vs cons +1.6% — a clear miss and the key negative.
Gross margin 49.1% vs cons 48.7% (slight beat); operating margin 19.5% vs cons 19.8% and op income $4,143M vs cons $4,236M — both misses.
FY27 guidance disappointing: organic sales +1–3% vs cons 2.5% (includes 30–50bps drag from brand/product discontinuations); EPS growth flat to +3% ($6.89–$7.11) vs cons +2.1%. Guidance embeds an ~8% ($0.57) EPS drag — $1B after-tax from raw materials/energy/transport, $150M interest, $150M lower non-operating income, $50M FX.
Broker view:
TD Cowen— cautious. Their read is that the beat was low quality (below-the-line), the organic miss and below-consensus FY27 organic guide were both disappointing versus bulls who wanted sequential improvement off FY26’s ~1%, and that this reinforces a longer-than-expected turnaround. No explicit rating/PT in the note, but the tone is decidedly negative. (This note appears twice in the document — same content.)
MDLZ +1.3%: ORGANIC GUIDE RAISED, EPS REINVESTED INTO BRAND SPEND BUILDING TOWARD STRONG 2027
Good but not entirely clean report.
Adj EPS $0.73 vs consensus $0.68 (Goldman had $0.69) — a ~$0.05 beat, though partly helped by below-the-line favorability.
Organic sales +2.2% YoY vs Street ~+0.8% — a clear top-line beat.
Volume/mix +0.7% YoY vs consensus of -1.3% — roughly 2pts better, and the standout metric.
Gross margin 34.0% (+~25bps YoY) vs consensus 32.7%; operating income $1,222mm (-4.8% YoY) slightly above consensus $1,209mm despite heavier reinvestment.
By segment: North America organic +3.4% vs cons ~+0.4% (volume/mix positive for first time in six quarters); Emerging Markets +4.4%; LatAm strong but flattered by a ~+1.5pt inventory pull-forward; Europe was light, with volume/mix -2.1% (hot weather / lower trade inventory), albeit sequentially better than 1Q’s -3.2%.
Guidance: raised FY26 organic sales to “at least +2%” (from +0–2%) but reaffirmed FY26 EPS at +0–5% — the beat is being reinvested into A&C rather than dropped to the bottom line, framed as building toward FY27.
Broker views:
Wells Fargo — Overweight, PT $70. “Sturdier.” Liked the setup into results (soft sentiment on Europe/cocoa) and the top-line beat delivered; sees the raised organic guide as conservative at the low end and 2H vol/mix comps easing meaningfully. Views 2027 as more anchored on good commodity/cocoa visibility. Argues risk-reward is attractive at ~18x CY27e, rare for a mega-cap staple under 20x.
Goldman Sachs — 2Q beat, FY26 EPS reiterated with improving top-line trends. Flags NA acceleration on broad share gains, sequential volume improvement in Europe despite the heat wave, and the FY26 reaffirmation as a reinvestment choice that should support strong FY27 EPS growth.
Barclays — “20/27 Vision,” PT raised $68 → $70. CY27 EPS estimate unchanged at $3.32; the higher PT reflects a bumped multiple (21.1x vs 20.5x) on greater confidence in an outsized FY27. Sees MDLZ as one of few large-cap food names with rising visibility to “strong” FY27 EPS (~+10% YoY, above the +HSD algo). Expects Europe volume to inflect positive in 3Q26 and EM strength to persist — but explicitly models a sharp ~-10% YoY EPS decline in 3Q26 (cocoa cost timing, interest expense stepping to ~$110mm, tax rate to ~25%) before a strong 4Q. Worth noting for near-term optics.
Net: all three are constructive; the shared debate is that a good top-line beat is being deliberately masked at the EPS line by reinvestment, with 3Q optically weak and the payoff pushed to FY27.
CAR -12%: KPI MISS ACROSS THE BOARD
2Q Adj. EBITDA was $286M (vs $246M cons), but the entire beat was driven by ~$100M lower vehicle depreciation on a seasonally strong used-car market and elevated disposition gains—a benefit expected to reverse in 3Q (DPU guided to $310-$320 vs ~$300 cons). Revenue was $3.0B (vs flat y/y), with core KPIs missing broadly: both Americas and International RPD were ~flat y/y while volumes fell -2% to -3%, dragging total revenue -1.3%. The pricing softness is the key disappointment given strong business/leisure demand and HTZ's more upbeat pre-announcement. FY26 EBITDA guidance was unchanged at $850M-$1B, but expect concerns around 2H pricing and mid-point achievability to weigh. Utilization was a bright spot at a record 72.6% (up 1.9pts). CEO Choi: "as booking trends shifted, we moved quickly to resize fleet, protect utilization and returns." Conf Call at 8:30am.
VFC -10%: Q1 LOSS $0.27 MISSES BY 5c, REVENUE $1.67B BEATS, FY27 GUIDE RAISED
VFC reported Q1 adjusted loss of $0.27, $0.05 worse than the ($0.22) consensus, on revenue of $1.67B vs $1.64B consensus (declining 5% YoY). Excluding divested Dickies, revenue rose 1% YoY (flat constant currency), ahead of the low-single digit decline guide. The North Face grew 6% YoY while Vans declined 8% (wholesale weakness offsetting Americas DTC growth); Timberland +4%. Gross margin came in at 54.9%, up 100 bps YoY, adjusted operating loss ex-Dickies of $95M was slightly better than the $100M guide, and net debt was reduced by $1.1B (20%). Management raised FY27 revenue guidance to +2% or better in constant currency. Shares -6% pre-market.
ANALYST RESEARCH & NEWS
Jefferies and MS divided on CAKE report. We side with Morgan Stanley as CAKE delivered a large beat with a guidance raise, the cleanest positive report in consumer sector today.
CAKE: JEFFERIES DOWNGRADES TO HOLD, PT RAISED TO $88 AS RISK/REWARD MORE BALANCED
Jefferies downgraded CAKE to Hold from Buy with a PT of $88 (from $75). The firm notes Q2 revenue of $1.03B beat consensus of $999M driven by CK SSS of 5.8% (traffic +2.7%, 350 bps ahead of the Black Box Casual Dining index) vs 2.2% consensus, with Flower Child SSS +13% offsetting continued North Italia softness (-3%). The firm says the app launch was a catalyst above expectations, alongside value bites & bowls, Rewards growth and personalization, retention & ops, and increased marketing. The firm takes ‘26/’27 CK SSS estimates from 1.7%/1.5% to 4.6%/2.5% and raises 3Q to 7% and 4Q to 4%.
CAKE: MORGAN STANLEY UPGRADES TO EQUALWEIGHT, PT RAISED TO $80 FROM $50 ON COMP RESILIENCE
Morgan Stanley upgraded CAKE to Equalweight from Underweight with a PT of $80 (from $50). The firm concedes the UW call no longer makes sense in the near term, citing resilience of the mall, experiences and nostalgia backdrop, better social engagement, peer capacity losses helping casual dining, and CAKE’s 5.8% CK comp being a clear standout historically ex-Covid. The firm takes numbers up ~10% for ‘26/’27 and models 3Q as a peak in SSS with easier compares through the 2H, though still views the multiple as overshot with downside embedded in the PT. Flower Child (13% SSS) also remains impressive and North Italia comps are soft but the firm sees continued promise in brand expansion.
KO: MORGAN STANLEY, BERNSTEIN RAISE PTs TO $100 AND $93 ON Q2 OSG BEAT
Two broker actions on KO post-Q2. Morgan Stanley raised the PT to $100 (from $89) reiterating Overweight as Top Pick; the firm says Q2 OSG of 7% (using 5% unit case and 2% price/mix) far outpaced 5.0% consensus, driven by unit case growth of 5% vs 2.2% consensus and well above the 1.1% nine-quarter average. FY OSG guide moved to the top of the prior 4-5% range and comparable FY EPS was raised ~100 bps; the firm notes Q2 was aided by World Cup, hot European weather and the America 250 celebration on an easy -1% comp, but underlying case growth was impressive and July trends continued strong. Bernstein SocGen raised the PT to $93 (from $83) maintaining Market Perform; the firm says the OSG beat of 6% vs 3.5% consensus and OI margin of 35.6% vs 35.1% consensus leaves “nothing to pick at,” but takes the target multiple from 24.0x to 25.5x to reflect the recent appreciation and staples rotation, seeing limited room for further expansion.
MDLZ: JEFFERIES RAISES PT TO $73, BUY MAINTAINED AS Q2 VOLUMES DRIVE ‘26 REVENUE RAISE
Jefferies raised the PT on MDLZ to $73 (from $70) maintaining Buy. The firm says Q2 results beat consensus with volumes surprising positive, prompting management to raise the ‘26 top-line outlook to at least +2% while holding EPS flat. Rather than bank the upside, management is reinvesting behind brands, innovation and distribution, a trade of near-term margin for durable growth. The firm notes EM growth remains sound and NA is inflecting though Europe stays softer, and the reinvestment bias tempers near-term profit flow-through but strengthens the multi-year setup.
NKE: BERNSTEIN LOWERS PT TO $68, MODELS LOW-TEENS FY27 CHINA DECLINE ON DTC OVERHAUL
Bernstein SocGen lowered the PT on NKE to $68 (from $72) maintaining Outperform. The firm notes Nike is fully eliminating its wholesale online business in China and cutting low-quality DTC online sales (deep discounts, gray market, third-party resellers) to improve brand equity and full-price selling, modeling a low-teens China revenue decline in FY27 that equates to a ~2 ppt drag on total company growth. The offset is stronger China margins from higher-quality mix (+200 bps FY27), making double-digit segment margins more achievable mid-term. The firm says Nike is unlikely to grow above market and recapture lost share, with Adidas likely the biggest beneficiary from the online rebalancing and higher Western/domestic demand at the tails.
ULTA: BOFA REITERATES BUY, PT $685, SAYS AMAZON PRESSURE REAL BUT ULTA RESPONDING
BofA Securities reiterated Buy and a $685 PT on ULTA. The firm says Amazon is a growing competitive threat on price, convenience and marketplace breadth, but ULTA is investing to close the gap: Ship-from-Store is now live in 1,000+ stores and delivers e-commerce orders roughly one day faster than DC fulfillment, while a newly announced Uber Eats partnership adds on-demand delivery from 1,500+ stores. The firm notes UB Marketplace and UB Media give ULTA an asset-light answer to AMZN’s assortment while monetizing loyalty data at higher margin.
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EARNINGS CALENDAR
