Next week represents the calm before the storm as it bridges the end of the Q2 reporting season and the beginning of the Q3 season. Therefore, we see little likelihood of company news moving markets and more of a focus on the oil price, bonds and geopolitics.
There are just a handful of companies reporting here and in the US (see below), and a handful of fund and trust updates. Among the latter, Fidelity Emerging Markets (BV6QJB2), Polar Capital Technology (PCT) and Schroder Japan (SJG) are the most noteworthy.
Constellation Brands (NYSE:STZ)
Shares in US beer and spirits group Constellation Brands (NYSE:STZ) have been disappointing this year, racking up an 18% loss. Most of that decline came in the last month, as weak US consumer confidence and spending data unnerved investors.
Therefore, there will be a lot of attention on the company when it reports Q2 earnings on Tuesday 6 October. After a positive Q1 showing, with beer sales buoyed by the World Cup, analysts are expecting another small rise.
Q2 revenue is seen increasing 3.6% to $2.57 billion, led by beer sales up 3.8% to $2.43 billion. Constellation’s beer sales are mostly brands imported from Mexico such as Corona, Modelo and Pacifico.
Analysts at Zacks Investment Research report the beer business has been outperforming the category in dollar share gains thanks to its premium positioning. ‘The beer segment has experienced gains from premiumization, driven by growth in traditional beer and flavored categories, including seltzers, flavored beer, RTD spirits and flavored malt beverages’, they add.
Earnings per share are seen slightly down on the same quarter last year at $3.62 versus $3.71 per share. Interestingly, although some analysts have lowered their price target for the shares of late, earnings estimates haven’t changed much.
This makes for an interesting set-up, as earnings have beaten forecasts by an average of around 10% over the last four quarters. If premiumization is indeed driving higher sales and margins, a better-than-expected report could see sentiment change sharply.
Consensus forecasts for Constellation Brands
| Q2 FY27 | FY 2027 | FY 2028 | |
| Revenue ($bn) | 2.57 | 9.09 | 9.25 |
| EPS ($) | 3.62 | 11.81 | 12.19 |
Source: Zacks Investment Research
PepsiCo (NASDAQ:PEP)
Long-suffering investors will be looking for signs of a turnaround in its North America business when food and drink powerhouse PepsiCo (NASDAQ:PEP) serves up Q3 earnings (8 October). Over one and five years, PepsiCo’s shares have dramatically underperformed those of Coca-Cola (NYSE:KO), the pure-play beverages behemoth whose revenues have proved more predictable.
Concerns over slowing demand for its snacks in North America, not helped by price increases to offset inflation, are weighing on PepsiCo’s stock. Another overhang is the potential long-term impact of weight-loss drugs on consumers’ appetite for sugary drinks and snacks.
Consensus forecasts for PepsiCo
| FY25 Actual | FY26 Est | FY27 Est | |
| Revenue ($m) | 93,925 | 98,899 | 101,704 |
| Net profit ($m) | 8,240 | 11,694 | 12,151 |
| EPS ($) | 8.14 | 8.55 | 8.93 |
Source: Stockopedia
The New York-headquartered firm continues to face weak snack sales in North America and sluggish demand from the convenience channel in particular. Led by CEO Ramon Laguarta, management is driving through productivity gains whilst pivoting towards zero-sugar drinks and less-processed food categories.
Back in July, PepsiCo reported a 4% rise in Q2 earnings per share (EPS) to $2.20, which topped the $2.19 consensus estimate. Revenue grew 6.4% year-on-year to $24.18 billion, ahead of the $23.95 billion Wall Street forecast.
For Q3, consensus calls for revenue in the $24.97 billion to $25 billion range and EPS of $2.30. There could be a relief rally if PepsiCo can stick to previous FY26 guidance for organic growth of between 2% and 4% and EPS growth in the 4% to 6% range.
Tesco (LON:TSCO)
Shares in supermarket giant Tesco (LON:TSCO) have been range-bound this year as attention has shifted to higher-growth stocks. We suspect for the shares to break out of their 440p to 500p range, H1 results on Thurs 8 October need to generate upgrades.
In the three months to May, UK & Irish like-for-like sales rose just 1.8% while Booker, the wholesale business, posted negative growth. Tesco has rolled out its Aldi price match campaign to over 2,000 Express stores, which may have impacted sales by value.
Consensus forecasts for Tesco
| FY25/26 Actual | FY26/27 Est | FY27/28 Est | |
| Revenue (£m) | 73,712 | 74,850 | 76,835 |
| Operating profit (£m) | 3,194 | 3,250 | 3,390 |
| EPS (p) | 29.0 | 30.8 | 33.2 |
Source: Tesco plc
During that time, the group’s market share was around 28.1% according to till roll data compiled by Kantar Worldpanel. Since then, however, it has dipped to 27.8% while Sainsbury (LON:SBRY), Asda and Morrison have held their market shares.
Hot weather during June, July and August may be a factor, as shoppers went out less and bought fewer, or at least different items. Also, the heat wave affected multiple stores with chiller cabinets unable to cope and breaking down due to extreme temperatures.
Alternatively, it may just be that Tesco’s summer offering didn’t resonate with customers the way other chains’ did. On the face of it, therefore, our hopes for strong results and a round of broker upgrades may be optimistic.
