Consumer Spec - Pre Market Wrap
DRI (-), MKC (+), WGO (-) Pre | KDP Upgrade, PVH Downgrade, DLTR Mantle Ridge Sale, NKE Previews, CASY Investor Day, K-Shaped Narrowing, KO Tax Case Begins, World Cup Beer Lift, CELH/ELF Scanner Soft
Consumer pre-market is mixed with restaurants and packaged food most active in the pre. EU consumer traded well after a great day of rotation yesterday on lower crude prices. Inflation numbers in a few minutes will be important, but I expect the recent move lower in crude prices to remain a positive catalyst for consumer and economically sensitive sectors, supporting continued relative strength in those areas.
DRI -3% despite FQ4 beat as Olive Garden lags LongHorn (+9.5% vs +2.4%) and FY27 guide of $11.10-$11.35 lands below Street's $11.41. MKC +2.4% on Q2 beat and FY26 reaffirmed, though tariff refund flatters optics. WGO cuts FY guide as RV demand stays soft. KDP gets Barclays upgrade to OW, PT $36, on post-separation thesis. PVH cut to Underperform at BofA on EMEA drag. DLTR -5.6% as Mantle Ridge files to sell $133M stake — never reads well. NKE previews into 6/30 look messy, BTIG slashes PT to $55. BofA's K-shaped narrowing chart encouraging.
MACRO & MARKETS
BARCLAYS: STAYS CONSTRUCTIVE ON GLOBAL EQUITIES, WARNS BONDS REMAIN MOST CHALLENGED, FED ON HOLD THROUGH 2026
Barclays maintained a constructive stance on global equities heading into Q3, forecasting global GDP growth of 3.1% in 2026 and noting that “the global expansion should persist,” with the U.S. profit cycle described as “the dominant force in global macro” as earnings broaden beyond mega-cap tech to support hiring, capex, and consumption. The firm warned, however, that “higher bond yields and richer valuations leave less room for error,” reiterated its preference for equities over fixed income, and called bonds “the most challenged asset class” amid worsening fiscal and inflation profiles globally. On AI, the firm said semiconductor order books remain “full well into 2027” and that vendor-financing concerns are exaggerated, though an infrastructure overshoot relative to demand is “likely a 2028 problem, not a 2026 concern.” The firm expects the Fed on hold for the rest of the year, with the ECB and BoJ “likely tighten policy at the margin.” The bottom line from the firm: “Stay long the cycle. Stay short complacency.”
US MACRO (EVERCORE ISI): BESSENT REMARKS LEAVE WARSH FED STRATEGY OPAQUE, CREDIBILITY TRAP RISK
The firm parses Treasury Secretary Bessent’s Economic Club of NY remarks and CNBC interview for clues on new Fed Chair Warsh’s policy approach given the absence of direct guidance, noting Bessent’s approving reference to Warsh coming out “tough” on inflation and an off-hand allusion to a Greenspan-style tap-the-brakes hike, which could imply wide latitude for a near-term move. However, the analyst flags that Bessent dismissed the hawkish June dot-plot (9/9 split hold vs hike) as subject to groupthink and called for an open mind on the Iran conflict’s inflation impact and on AI-driven non-inflationary acceleration, framing that is not obviously consistent with preparing a July/September hike. Evercore views Warsh as pursuing a two-phase approach, prioritizing credibility against elevated inflation in phase one with institutional reform and a more dovish bias in 2027, but argues his hawkish debut without nuance on inflation interpretation has created a credibility trap whereby if inflation does not move in the right direction over the next few prints, he will be forced to hike by September or risk his own credibility definition. The firm warns the guessing game on Fed strategy is generating economically inefficient uncertainty and risks volatility, whipsaws, or overshooting, and any clarification from Warsh now would be costly given the gains his hawkish debut has delivered in inflation swaps and the dollar.
INTERESTING CONSUMER CHART HIGHLIGHTED IN BOFA SPEC DESK TODAY:
Message is clear: K-shaped consumer seems to be narrowing
CONSUMER STREET RESEARCH
Upgrades
Keurig Dr Pepper (KDP) Raised to Overweight at Barclays; PT $36
Downgrades
Cheesecake Factory (CAKE) Cut to Hold at CFRA
PVH Corp (PVH) Cut to Underperform at BofA Securities; PT $70
Initiations
No initiations in consumer sector today
EARNINGS REPORTS
DRI -3%: FQ4 EPS AND COMPS BEAT, BUT OLIVE GARDEN LAGS AND F27 GUIDE LIGHT
DRI reported modest FQ4 EPS upside, with EPS of $3.66 vs. consensus of $3.63, while same-restaurant sales also beat at +4.6% vs. the Street at +4.3%. The comp upside was driven by strong LongHorn Steakhouse performance, with comps of +9.5% vs. consensus of +7.0%, although Olive Garden missed expectations at +2.4% vs. +3.4%.
Introduces FY27 guidance:
EPS $11.10-11.35 vs. $11.41 consensus
SSS +2.5% to 3.5% (I think consistent with bar, straddles consensus, comparable to last year’s intro guide too)
New openings of 75-80
Total inflation of ~3%
In addition, DRI announced increased capital return, including an 8% dividend hike and a new $1.5B share repurchase authorization.
MKC +2.4%: Q2 EPS OF $0.80 BEATS $0.70 CONSENSUS, REAFFIRMS FY26 OUTLOOK
MKC reported Q2 adjusted EPS of $0.80 versus the $0.70 consensus, on revenue of $1.94B (vs. $1.91B), up 16.7% YoY.
Organic sales grew 1.7% on pricing. The Consumer segment generated $1.14B in sales (+22.8% YoY), while Flavor Solutions reached $794M (+8.9%). Adjusted operating income rose 30.1% to $336M, and gross margin expanded 270 bps to 40.2%, helped by the McCormick de Mexico acquisition, an IEEPA tariff refund, pricing actions, and cost savings.
FY26 guidance was reaffirmed: adjusted EPS of $3.05-$3.13 (midpoint matches the $3.09 consensus), net sales growth of 13%-17% (including 11%-13% from McCormick de Mexico), organic sales growth of 1%-3%, and adjusted gross margin expansion of 100-120 bps.
Key Takeaways
EPS beat is optically large but quality is mixed. $0.80 actual vs Street $0.69 includes a ~$28mm tariff refund reversing prior-period absorbed tariffs. Strip it out and GM/EBIT still modestly above Street, but the headline is not as clean as it looks.
FY26 reaffirmed is the most important data point. Buyside was bracing for a guide-down; mgmt held the line (EPS $3.05–$3.13 vs Street $3.09, organic +1–3% vs Street +1.8%, OP +16–20% vs Street +18.2%). The tariff refund is now embedded to offset higher inflation, including incremental Middle East conflict cost.
GM guide quietly tightened higher to +100–120bps vs prior “expansion” language and Street +75bps, which is the most underappreciated positive in the print.
F3Q26 OI guide is the negative offset. Mgmt called for HSD-to-LDD OI growth vs Street +18.6%, implying a step-down on continued GM expansion offset by ERP-related tech investment. This is where the post-call reset risk sits.
Consumer Americas is the bear case in real time. Volumes ‑3.6% y/y; mgmt flagging shifting demand patterns, wider price gaps, and competitor activity from both private label and branded. This is the structural debate the print did nothing to resolve.
Flavor Solutions is the offset and is working. +2.9% organic on +1.4% volume, with segment OP +25.8% vs Street +7.4%. Mix shift toward this segment is incremental positive for the longer-term margin story.
Cost inflation reiterated +MSD with Middle East conflict referenced as an incremental pressure point not in the original FY26 build.
Barclays first takes on the report:
MKC delivered a sizable (+16%) F2Q26 EPS beat, though a significant portion came as a result of a $28mm tariff refund that reversed tariffs the business had absorbed during prior periods. Excluding the refund, gross margin and EBIT still came in a bit above Street estimates, though the core Consumer Americas business fell under increasing pressure during the quarter given shifting demand patterns, widening price gaps, and greater competitor activity from both private label and branded. All in, given what we believe was building investor concern around the potential for an FY26 guide-down, we’d think today’s underlying F2Q26 profit beat and consequent FY26 reiteration should be good enough given what is already discounted in shares currently, even in the context of a somewhat softer consumer environment in the Americas.
WGO -1.3%: CUTS FY EPS GUIDANCE AFTER FQ3 SALES, EPS AND EBITDA MISS CONSENSUS
WGO reported a weaker-than-expected FQ3, with EPS of $0.66 vs. consensus of $0.77, EBITDA of $37.8MM vs. $44.8MM, and revenue of $699MM vs. $756MM.
The miss was driven by softer sales and weaker profitability, with EBITDA margins of 5.4%, roughly 50bp below consensus. Management also cut FY EPS guidance to $1.65–$2.00 from the prior $2.10–$2.80 range, reflecting continued pressure from weak retail demand, cautious dealer ordering, and tighter channel inventory management. Bright spots included relatively stable gross margins and better performance in motorhome RVs. Call at 10am.
ANALYST RESEARCH & NEWS
KDP: BARCLAYS UPGRADES TO OVERWEIGHT FROM EQUAL WEIGHT, PT TO $36 FROM $30
The firm turns incrementally bullish post-separation, arguing improved leverage and waning transaction uncertainty have opened runway for re-rating as the early-2027 Bev Co / Global Coffee Co split draws closer, with updated SOTP work pointing to +LDD upside and “compelling” mid-teens upside across EV/EBITDA and P/E frameworks. Key concerns have been addressed via private credit financing (a $4bn 49% pod JV at 7.3% to 7.4% cost of capital plus $4.5bn of 4.75% convertible preferreds following Bev Co post-separation), taking pro forma leverage to ~4.1x from ~5.2x at YE26 inclusive of Year 1 net synergies, while Tuesday’s news of Rafa Oliveira departing to become HEINY CEO instead of leading Global Coffee Co is a setback but does not alter the strategic direction. The new $36 PT assumes ~15.5x CY26 P/E (LDD discount to large-cap Staples) on $2.30 CY26 EPS, in the same ballpark as SOTP-implied value, with the analyst flagging KDP as one of the strongest growth profiles in coverage and the balance of risks now tilted favorably.
PVH: BOFA DOWNGRADES TO UNDERPERFORM FROM NEUTRAL, PT TO $70 FROM $90
BofA cuts the rating, citing 50% EMEA exposure (the highest in coverage) limiting upside potential amid a challenging macro backdrop, with the Middle East and Türkiye seeing softer demand and margin headwinds despite Middle East ex-Türkiye representing just 1% of sales but 7% of total EBIT given its entirely wholesale mix. Even if geopolitical tensions ease, the analyst expects EMEA recovery to take time given high wholesale exposure (50% of total) where partners are cautious about inventory risk, with UAE tourism flows (PVH’s largest regional market) meaningfully impacted. PVH’s guidance now fully embeds expected tariff refunds ($100mn in 2Q, ~100bp annual GM benefit), leaving less cushion in 2026 vs. peers and tough margin comparisons in 2027; 26E to 28E EPS cut by 1% to 3% to $11.97/$12.50/$13.45, with the new $70 PT based on 4x (was 5x) 27E EV/EBITDA, a discount to peers given greater near-term pressure and lower margins.
Few charts to highlight:
DLTR: SHARES OFF 5.6% PRE-MARKET AS MANTLE RIDGE FILES NOTICE TO SELL $133M STAKE
The stock is down 5.6% in premarket trading after activist Mantle Ridge LP filed notice to sell 1,115,228 shares for $133.1M. The disposal is a meaningful monetization by a key holder and was filed without an accompanying corporate update. Mantle Ridge has been a vocal voice in the name’s strategic repositioning, and the size of the sale will likely be read as a moderation of conviction at current levels. No rationale was disclosed in the filing.
CZR +4%
KO: EVERCORE ISI FLAGS IRS TAX CASE APPEAL BEGINS THIS WEEK, REITERATES OUTPERFORM
The firm notes KO’s tax case against the IRS begins in Miami federal appeals court this week, with the company having estimated in its April 30th 10Q that a full loss would lift its tax rate by 380 bps (vs prior 350 bps estimate pre-1Q26) and trigger a $14B additional liability covering 2010 to 2025, taking leverage from ~1.6x to ~2.4x and representing a $0.17 / ~5% headwind to 2027 EPS. The analyst flags that KO’s $520M tax reserve as of April 2026 sits well below the potential liability, but believes the outcome is not binary, citing tax expert H. David Rosenbloom (NYU Law) who estimates a ~70% chance KO prevails in Brazil (~15% to 20% of the case) vs ~30% in the other countries. The firm reminds that the U.S. Tax Court ruled against KO in November 2023 following the February 2023 ruling against 3M, with KO subsequently making a $6.0B payment in 3Q24 covering 2007 to 2009 tax years; Evercore notes most investors expect KO to eventually lose but are uncertain on timing.
CELH: MORGAN STANLEY FLAGS SEQUENTIAL SLOWDOWN IN SCANNER, MAINTAINS OW
Another neg note from MS on CELH. MS notes total CELH energy drink scanner sales (Celsius+Alani+Rockstar, ex powders/ancillary) decelerated to +4.7% in the 2W ended 6/13 from +15.9% prior, with dollar share down 50 bps sequentially to 18.7%, driven by Alani Nu lapping last year’s Cotton Candy LTO (growth slowing to +23% from +66%, with this year’s Purple Cotton Candy LTO launching two weeks later). The analyst flags a modest improvement in brand Celsius to -3.5% from -5.3% with 2-yr average swinging to +1.6% from -2.5%, and reiterates Overweight with a $48 PT (~16.5x FCY27 EV/EBITDA, discount to MNST) citing favorable risk/reward, solid category growth, Red Bull’s +HSD price increase announced for Aug 1, and a path to brand Celsius improvement later this summer. Estimates were lowered earlier this week to reflect softer QTD brand Celsius takeaway.
ELF: MORGAN STANLEY HIGHLIGHTS MUTED BASE ELF SCANNER, REITERATES EW
Morgan notes base ELF (ex Naturium) US Nielsen all-channel scanner sales (now including Costco ex alcohol plus Amazon 1P) decelerated to -3.4% in the 4W ended 6/13 vs +1.1% in the L12W, with ELF Cosmetics market share (~70% of total ELF scanner sales) down 185 bps YoY in the latest 4W vs -130 bps prior. The analyst flags total ELF reported growth of +5.4% L4W is boosted by Naturium’s transition to Amazon 1P (now scanner-tracked) and the Spring Walmart launch, with Naturium up +130% L4W. By subcategory in L4W, eye cosmetics remain strong at +15.7% with share +77 bps, facial cosmetics softened to -1.2% with share -136 bps, and lip cosmetics deteriorated to -31.6% with share -627 bps.
GIS: EVERCORE ISI LOWERS PT TO $39 FROM $43, REITERATES IN LINE
The firm trims near-term estimates as category deceleration is not fully offset by some market share improvement, cutting F4Q26e EPS to $0.84 from $0.89 (+14% YoY; cons. $0.81) on flat YoY organic sales (prior +1%), with Mills improving category dollar share by 30bp but pound volumes decelerating ~1pp. The analyst lowers FY27e EPS to $3.14 from $3.31 (-9% YoY; cons. $3.18), reflecting a fuller incentive-comp rebuild, the 53rd-week lap, the divested month of yogurt, and ~3% underlying inflation plus incremental tariffs, partially offset by 4%+ HMM productivity and at least $100M of transformation savings.
Few broker notes on CASY investor day notes.
CASY: GOLDMAN SACHS REITERATES NEUTRAL POST INVESTOR DAY
Casey’s hosted its Investor Day in NYC where management unveiled a refreshed three-year strategic plan guiding to +8% to 10% EBITDA growth through FY29, a bar the firm thinks could prove conservative, underpinned by an accelerated food and beverage business, continued new unit growth, and enhanced operational efficiencies. The analyst came away impressed with execution against the prior plan and views the company as operating in smarter, more nimble fashion while leveraging scale advantages at a time when industry dynamics favor larger players, albeit with volatility. However, the firm argues this is more than embedded in valuation at 36.6x forward P/E and 29.4x EV/EBITDA, an ~80% premium to MUSA/ATD on forward EV/EBITDA vs. 3-year/5-year historical premiums of ~36%/23%, supporting the Neutral rating.
CASY: EVERCORE ISI REITERATES OUTPERFORM, BASE CASE $975 POST INVESTOR DAY
The analyst views CASY as a core Food Retail holding with ~20% upside on a 12 to 18 month view following the NYC Investor Day, which reinforced the 8% to 10% EBITDA growth algo without major surprises and underscored the setup for top-quartile c-store comps, strong unit growth, and margin realization. Degrees of freedom flagged include build/acquire potential of 500 to 600 stores vs. the 400 outlined, 2 to 3 cents of additional fuel CPG from internal initiatives, chicken wings adding 50 to 150bps to comps over several years, and AI-driven efficiency, all of which could drive mid-teens or higher EPS growth; ISI flags fuel CPG structural upside to the mid-40s over a three-year horizon, and notes CASY trades at ~1.8x the S&P on FY2 EPS, the high end of its five-year 1.0x to 2.2x range, justified by share gain, margin enhancement, and M&A levers, with 1.5x leverage vs. 2.0x target and $2bn+ of cumulative three-year FCF leaving capacity for a transformative deal.
CASY: BOFA REITERATES BUY AND $975 PT POST ANALYST DAY, NEW 3-YR PLAN UNVEILED
The firm came away from CASY’s NY Analyst Day positive, highlighting the new 3-yr plan targeting 8% to 10% EBITDA CAGR through FY29, at least 400 new stores via builds/M&A, mid-single-digit inside SSS, flat fuel gallons, inside margin expansion, fuel cpg in the mid-40s range, and cumulative FCF of $2.0bn over F27 to F28 (vs $1.68bn over F24 to F26, which exceeded all prior plan targets). The analyst frames CASY’s “Convenience QSR” model integrating foodservice, grocery/merchandise, and fuel as a structural advantage vs QSRs and smaller c-store operators, noting EBITDA CAGR accelerated from 9.3% over F10 to F20 to 13.8% over F20 to F23 and 15.9% over F23 to F26.
NKE previews into earnings, more to come next few days.
NKE: BTIG CUTS PT TO 55 FROM 75, NEEDHAM REITERATES HOLD AHEAD OF 6/30 PRINT
Two broker actions hit ahead of next Tuesday’s (6/30 AMC) F4Q26 print. BTIG (Buy) lowered its price target to $55 from $75 but framed the setup constructively: the firm models Q4 revenue of $10.9B, gross margin of 39.9% (down 37 bps YoY), and adjusted EPS of $0.13, with investors expected to focus on the China turnaround and the durability of North American improvements. BTIG forecasts revenue down approximately 20% in Greater China in Q4 on intentional sell-in reductions and accelerated marketplace cleanup, viewing the regional challenges as well understood and a time-based recovery. On the bear side, Needham reiterated Hold and flagged that the pace of the turnaround “remains frustratingly slow,” with domestic DTC still pressured against tough North America wholesale compares ahead and EMEA macro presenting risk to the key region. The firm doesn’t see Q4-specific risk after management said the quarter was “generally in line,” but warns management may signal a slow start to FY27. Needham raised its Q4/FY26/FY27 EPS forecasts to $0.28/$1.66/$1.72 (from $0.08/$1.38/$1.66) on a tariff refund benefit and the IEEPA tariff reduction, with FY27 still about $0.10 below consensus.
NKE: RAYMOND JAMES STAYS MARKET PERFORM INTO F4Q26 PRINT
RayJay stays sidelined into the June 30 print, arguing NKE will not deliver a strong enough beat to flip the negative narrative and that the outlook will reflect lingering pressure, with new CFO David Denton (ex-Pfizer, Lowe’s) viewed as a mixed read that also raises questions about how the turnaround is tracking into this fall’s pivotal Investor Day. F4Q estimates are in line with Street across revenue, margins, and EPS (model revenue -2.3%, GM% -50bp to 39.8%, EBIT -75bp to 2.1%), while FY27 EPS sits at $1.85 vs. Street $1.77 on SG&A cuts as NKE pushes toward double-digit EBIT margins, with FY27 revenue modeled flat vs. Street +0.5%. The bull case of +5% FY27 revenue and 10% EBIT% would imply $2.70 EPS and a 15.5x P/E at ~$42 vs. a 27.5x five-year average, but the analyst lacks confidence in execution at that pace and prefers ONON and DECK as cleaner growth stories at lower multiples. Channel checks were mixed, with higher discounted SKUs y/y, improved Google Trends and app downloads q/q, but softer foot traffic and mobile app users.
BRBR: TD COWEN STAYS HOLD AS PRIME DAY BOOST LIKELY ALREADY IN THE STOCK
Cowen flags that BRBR is up >30% since the start of last week amid a spike in incoming investor calls, with Circana data showing total BellRing growth of +4% and Premier shake growth of +3% QTD through the first week of June vs guidance for total sales -1%, though the analyst expects consumption to decelerate in June as the company laps club promotions that are nonrecurring or shifted earlier in the quarter. The analyst notes Premier Protein was the top-selling item by units on day one of Amazon Prime Day per Numerator, with Premier’s shake discounts at 20% to 40% vs Core Power 15% to 20%, Muscle Milk 25% to 30%, and Oikos 15% to 25%, but views this as unsurprising given last year’s similar Prime Day results.
BEER (TD COWEN): WORLD CUP DELIVERS MODEST UPLIFT TO L2W BEER TRENDS
The firm tracks non-alc bev sales slowing to +3.5% L4W through 6/13 (+4.6% YTD) and alcohol -4.1% (-2.7% YTD), with core beer trends improving 110 bps to -3.3% in L2W (L4W -4.4%) attributed to the World Cup kickoff on June 11, though still trailing the -2.7% YTD trend. The analyst notes STZ beer improved 240 bps to +0.1% L2W from -2.3% L4W, BUD beer improved 50 bps to -3.4% from -3.9%, and TAP beer improved 80 bps to -5.7% from -6.5%, with the firm expecting further STZ improvement as World Cup tailwinds flow through and comps ease (F1Q27 L13W beer sales -1.2% vs consensus +1.4%, FY27 -1% to +1% beer guide viewed as achievable).
On non-alc, the analyst flags a 320 bp YTD CSD growth gap between SNAP-restricted states (+1.2%) and non-restricted (+4.4%), with Celsius brand -4.4% L4W (+2.3% YTD) lapping 2025 innovation, Alani Nu +41.5% L4W (+72.4% YTD), KO +4.1% L4W with Fairlife milk +12.7% (capacity expansion expected to accelerate trends in 2H26), and PEP -0.9% L4W as Frito-Lay initiatives have not driven an inflection.
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EARNINGS CALENDAR
