Consumer Spec - Pre Market Wrap
KO (+), UL (+), PII (+), RCL (-), HLT (-) | K-Shaped Gap Closed, Low-End Card Growth Leads | ACI, CLX, LEVI Downgrades | JBS OW Upgrade | EAT PT Raise, VSCO OW, WYNN Cut | Staples Weak, QSR/Mass Setup
Consumer tape opens constructive, led by an interesting macro datapoint — BofA says the K-shaped spending gap has finally closed, with lower-income card growth now outpacing the high end, a tailwind for WMT, DG and MCD and the overall consumer sector. Most importantly, the market appears increasingly eager to diversify beyond technology and AI, a trend that should provide broader support for the consumer sector.
Earnings largely cooperate: KO +3.5% on a clean organic beat-and-raise, UL +8% as volumes hit a decade high, PII +7% though tariff refunds flatter the number. Lodging and cruise disappoint on flow-through — HLT -3%, RCL -2% despite the EPS beat. Staples still bleeding: UBS pulls ACI to Neutral, Jefferies cuts CLX, Wells fades LEVI post-rerate.
MACRO & MARKETS
MACRO: BOFA SAYS K-SHAPED CONSUMER SPENDING GAP HAS CLOSED WITH LOWER-INCOME CARD GROWTH LEADING
Bank of America’s aggregated credit and debit card data (ex-gas) show lower-income households now posting slightly stronger YoY spending growth than higher-income households, marking a reversal of the K-shaped pattern that persisted for over a year, with the shift visible in the last two weeks. The firm attributes the reversal to three drivers: greater low-end sensitivity to labor income (aided by increased job growth and reduced tax withholdings following OBBBA changes); a substantial June drop in gas prices (since partially reversed), which matters more to low-income households; and favorable base effects from the June 2025 spread widening. Read-through is supportive for low-end-exposed consumer names in mass/discount (WMT, DG, DLTR, FIVE), QSR (MCD, YUM), and grocery (KR, ACI).
US CONSUMER (GOLDMAN SACHS): RESILIENT SPENDING, WEAK CASHFLOW
The firm characterizes consumer spending as holding up, with real PCE running +2.1% y/y though decelerating to a 1.3% six-month annualized pace through May, and flags June retail sales as firm (headline +0.2%, core +0.5% nominal and +0.6% real). GS attributes much of the recent resilience to an outsized lift from OBBBA tax cuts and estimates midterm-election-related nonprofit outlays (captured in official PCE) are adding roughly 0.2pp to y/y growth. Looking ahead, the firm expects inflation-driven headwinds to cool spending through year-end, forecasting real spending growth of just 1.5% annualized in 2H26 and 1.5% on a Q4/Q4 basis for 2026, below 1.6% consensus.
CONSUMER STREET RESEARCH
Upgrades
JBS (JBS) Raised to Overweight at JPMorgan; PT $18
Downgrades
Albertsons Cos (ACI) Cut to Neutral at UBS; PT $12
Clorox (CLX) Cut to Hold at Jefferies; PT $98
Levi Strauss (LEVI) Cut to Equal-Weight at Wells Fargo; PT $25
Initiations
No initiations in consumer sector today
EARNINGS REPORTS
KO +3.5%: Q2 EPS BEATS BY 4C, REVENUE TOPS ESTIMATES; GUIDES FY26 EPS GROWTH 9% TO 10%
2Q EPS $0.97 vs $0.93 (+4%); organic revs +6% vs +3.6% consensus and a ~+4% bogey — a 250bps beat. North America drove it (+7% vs +3.5%), LatAm +100bps, EMEA -100bps. Gross margin beat 100bps, operating margin 70bps.
FY organic guide raised to +5% (from +4-5%) and EPS guide up 100bps. KO raised its 2026 outlook, now guiding organic revenue ~+5% (from +4-5%) and comparable EPS growth +9-10% implying ~3.29 at the midpoint (from +8-9%) with FCF lifted to ~12.4bn, and the analyst adds FIFA-related activations and summer heatwaves likely extended the tailwind into early 3Q.
Unit case volume rose a striking +5% (double analyst estimates, albeit on the year's easiest comp) with beats in every operating unit and consolidated OSG of +6% vs. est +3.3%, momentum evident across all regions including high-single-digit Asia Pac volumes and North America organic sales +7%, while operating margin expanded +85bps YoY versus consensus +30bps, fully gross-margin driven.
The one soft spot is EMEA OSG at +3% (vs. +5.5%), on price/mix ~4 points below forecast.
RCL -2%: Q2 EPS BEATS BY 28C, REVENUE MISSES; RAISES FY26 EPS GUIDANCE ABOVE CONSENSUS
Puts and takes, but close to the setup investors expected (2Q beat + softer 3Q net yield guide — both delivered). 2Q EPS $4.21 vs $3.98, EBITDA a hair light ($1.80B vs $1.82B), revs in-line. Net yield +1.2% (vs +1-1.5% expected); NCC ran a touch hot at +4.4% vs +4%. 3Q EPS guide fine at $6.31 vs $6.26, 3Q net yield flat as expected.
FY EPS raised above range to $17.80 vs $17.32, but total revenue guide trimmed to +9% (from +10%); FY net yield mid maintained at +1.75-2.25%. The raise is cost/flow-through-led rather than yield-led, with the net yield range merely narrowed to 1.75-2.25% (from 1.5-2.5%). On bookings, near-term language softened modestly on geopolitically-impacted itineraries while RCL remains booked at record prices, and the Morgan Stanley flags incrementally better 2027 pacing running ahead of historical levels. 3Q EPS guidance of 6.26 to 6.36 is broadly in line on flat net yield, leaving a required ~+5% Q4 yield inflection as the likely call focus;
Mgmt: a "modest, near-term impact on bookings for select itineraries, primarily due to prolonged geopolitical activity," while noting record pricing, booking volumes above last year, and robust load factors.
Focus on the call (7/28, 10AM EST 888-880-3330). 1) Color on net yields by geography given the guidance revision; 2) Drivers of FY26’s Adj. EPS guide, which was above the Street with myriad elements driving the change; 3) Updates on the timing of Perfect Day Mexico, given the recent delay due to environmental concerns; 4) Ongoing prospective impact from geopolitical dynamics, including on fuel and itinerary planning; 5) Capital allocation intentions, particularly regarding capital returns given RCL’s $199M buyback in 2Q.
HLT -3%: Q2 IN LINE, Q3 EPS GUIDE MISSES CONSENSUS; RAISES ROOM PIPELINE 6% YOY
Solid quarter that met the high bar rather than clearing it. 2Q EPS $2.29 vs $2.27 and EBITDA $1.05B vs $1.04B; RevPar strong at +3.9% vs +3.5% consensus, US even better at +5.4%.
The hold-up is flow-through: 2Q flow-through came in a bit below expected and the 3Q EBITDA guide sits ~3% under (and just under the ~$1.07B buy-side bar). FY raised — EBITDA mid to $4.06B (from $4.04B) and RevPar to +3-3.5% (from +2-3%), roughly the 50bps raise the buy side wanted, so effectively in-line.
Mgmt struck a confident tone: "Strengthening demand trends and broad-based momentum across our system, which we expect to continue for the remainder of the year and into 2027." Fundamentals fine, but the absence of bottom-line upside likely keeps shares range-bound near-term.
PII +7% BEAT, GUIDE RAISED
Top and bottom beat with a second guidance raise this year, though note the tariff distortion. EPS $1.97 vs $0.75 FactSet — but ~$0.96 was a tariff refund benefit; revenue $2.02B vs $1.95B. Adj gross margin 23.9% (vs 20.1%) and adj EBITDA margin 11.8% (vs 7.8%). Powersports drove it (+17%), NA ORV retail up MSD vs an estimated LSD industry.
FY26 EPS raised to $3.00-3.10 (vs $1.86 cons, prior $1.60-1.70), of which ~$0.96 is tariff refunds; sales to $7.30-7.50B. Mgmt sees a flattish 2H retail backdrop and remains “confident in our ability to deliver long-term profitable growth and shareholder value.”
Call at 9am.
UL +8%: Q2 VOLUME BEAT DRIVES GUIDANCE UPGRADE
Goldman highlights Unilever’s Q2 organic sales growth accelerating to +5.8% y/y on +5.5% volume growth, its best in over a decade and well ahead of company-collected consensus of +2.5%, led by Beauty, Personal Care and Home Care while Foods missed (ex-Foods OSG would have been +7.6%).
Goldman notes pricing was thin at +0.2% (cons +1.7%) and FX a -2.4% drag, leaving Q2 reported sales of €13,046m ~1% above consensus, while gross margin fell 70bps y/y to 46.8% on adverse Home Care mix and input costs and H1 underlying EPS of €1.61 landed 1.3% ahead. On the beat-and-raise, management now guides FY26 OSG within its 4-6% target (from the lower end) with ~3% organic volume growth, prompting the firm to lift its FY26 OSG forecast to +4.7% (from +4.2%) and FY26/27 EPS by ~2%.
ANALYST RESEARCH & NEWS
JBS: JPMORGAN UPGRADES TO OVERWEIGHT, PT 18 ON MEXICO CATTLE REOPENING AND US BEEF FLOOR
JPMorgan upgraded JBS to Overweight from Neutral with an $18 PT, calling the recent correction an opportunity at 6.0x EV/EBITDA 2027E US GAAP and a 2% FCF yield. The firm says the phased reopening of the Mexico-U.S. cattle border should set a floor for U.S. Beef margins and support a gradual recovery into 2H26, estimating that every 1pp increase in US Beef EBITDA margin lifts JBS consolidated EBITDA by 4.6%. The analyst notes the current share price already discounts 0% normalized US Beef margins and 8% for PPC, both viewed as overly conservative. The main risk remains at PPC, where US poultry supply indicators have not shown meaningful cuts and big-bird prices remain subdued, though PPC consensus EBITDA has already been reset to $1.5B (from $1.9B roughly three months ago), which the firm views as more reasonable.
ACI: UBS DOWNGRADES TO NEUTRAL, PT CUT TO 12 FROM 20 ON CONSUMER, EXECUTION RISKS
UBS downgraded ACI to Neutral from Buy and cut the PT to $12 from $20, citing five post-1Q developments: persistent consumer headwinds pressuring unit demand in conventional grocery, higher price positioning vs. peers, near-term execution risk from consolidating 11 divisions into 4 regions, downside if elevated oil prices persist post-3Q, and the recently announced departure of the President & CFO.
CLX: JEFFERIES DOWNGRADES TO HOLD, PT 98
The firm downgrades CLX to Hold, having stayed constructive through the volatility underwriting F27 earnings power north of 7.00, but the analyst now concedes that number is hard to defend and cuts F27 EPS 10% to 5.60 (+1.5% y/y vs. Street +8%). The analyst notes an incoming, as-yet-unnamed CEO arriving amid soft share trends raises the odds of heavier reinvestment and a guidance rebase, with F27 EPS guidance seen ~6pp below Street at the midpoint (top-line +11.5-13.5%, EPS -1% to +4%). Retail trends remain muted (sales -1% over the last month, flat over six), category growth is below historical, and share losses persist in trash bags and cat litter, with just 18% of the portfolio gaining share y/y, while leverage of ~3.5x further limits flexibility after GOJO took accretive buybacks off the table.
EAT: CITI RAISES PT TO 227, LIFTS FY27 EPS TO 13.31 ON CHILI’S SSS MOMENTUM
The firm raises its PT to 227 from 189 on multiple expansion to 10.75x NTM EBITDA (~0.8x the market multiple, up from 0.7x), and lifts FY27E EPS to 13.31 from 12.92 (+3%), now ~7% above Street’s 12.48, with FY26E to 10.91 and FY28E to 13.91, all driven by stronger Chili’s SSS and a move toward a unit-growth inflection. The analyst sees upside to the F4Q print (8/12) and expects F27 guidance ahead of Street, flagging the 53rd week as a meaningful tailwind consensus does not appear to fully capture. Footfall data is constructive, with y/y growth accelerating ~5% q/q to +3.1% in F3Q, 4QTD running ~+8%, and measured share at new highs, though the analyst adds Second Measure showing sales/traffic -0.2%/-4.5% (vs. +1.4%/-3.4% in F3Q) is a deceleration worth watching into the print and September Investor Day.
VSCO: JPM RAISES FY27 EPS TO 5.98, 10% ABOVE STREET, REITERATES OW PT 110
The firm raises FY27 EPS to 5.98, ~10% above Street’s 5.46, and FY26 EPS to 4.65 (vs. guide 4.35 to 4.60), driven by richer full-price selling mix, lower markdowns, and tariff offsets that net positive in FY27. The analyst lifts 2Q revenue growth to +11.5% Y/Y (above Street +10.8% and the +9-11% guide) and 2Q EPS to 0.81 vs. Street 0.75, with fieldwork flagging the digital-outage exit rate as incremental upside, and models 2Q gross margin +346bps to 39.1% on a ~100bps markdown tailwind. The analyst adds 3Q marks a unit-growth inflection, with units seen turning positive while AUR stays elevated lapping 2H25 price increases and new-customer growth accelerating for a third straight quarter into younger, higher-AUR cohorts, underpinning the Overweight rating and 110 PT.
LEVI: WELLS FARGO DOWNGRADES TO EQUAL WEIGHT, PT 25, AFTER RE-RATING RUN
The firm downgrades LEVI to Equal Weight from Overweight, holding the 25 PT (~2% downside), arguing the stock has delivered the upside it expected, up 40% vs. SPX +14% and re-rated from below 12x to ~15x P/E, leaving the easy money behind. The analyst keeps a constructive long-term view, noting revenue is now planned +7-7.5% (from +5-6%) with consecutive EPS beats through 1H26, but flags 2Q as a hint of 2H25, with the revenue plan beating ~300bps while margins disappointed (9.0% vs. planned 8-9%) and the 3Q guide of 11.9% landing ~100bps below Street. The analyst adds the 4Q ask, revenue +3-4% plus 150-200bps of margin expansion, looks daunting as it requires 45-50bps of incremental flow-through that has not yet appeared, and the CFO’s November retirement adds an overhang the firm is unwilling to pay through here.
WYNN: MIZUHO CUTS PT TO 125 FROM 133, KEEPS OUTPERFORM ON VEGAS LABOR, MACAU CAUTION
Mizuho cut the price target on WYNN to $125 from $133 while maintaining an Outperform rating ahead of 2Q26 earnings, updating estimates in both Macau and Vegas. The firm says labor costs could weigh on Vegas trends juxtaposed with the ongoing Encore renovation, and notes one fewer weekend day in June ‘26 vs. last year, though underlying Vegas trends are viewed as healthy. In Macau, the analyst is “slightly more cautious on overall backdrop of the market in the medium term.”
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EARNINGS CALENDAR
