Earnings Scoreboard - Priced for both ends

This week’s themes: the experience consumer at altitude and a defensive staples’ stress test

The macro backdrop has shifted from Q1, shaping every earnings print this week. The US – Iran interim accord signed in Switzerland on 19 June reopened the Strait of Hormuz and pushed Brent back to the low $70s, levels last seen in the early stages of the conflict. That is clear relief for fuel- and freight-sensitive businesses. Yet it comes as the Fed, now led by Chair Kevin Warsh, who signalled a restrictive-for-longer policy stance, with headline inflation still at 4.2%. Markets are left debating whether the next move is a late-2026 hike, making Wednesday’s Fed minutes especially important. Add a tariff regime in which the Supreme Court has struck down large parts of the IEEPA framework, releasing refunds that are already flowing through corporate results, while steel, aluminium and sector-specific duties continue to keep input costs elevated, and the cross-currents remain substantial. This week’s reporters each sit at a different intersection of those forces.

The value-conscious staples consumer. PepsiCo's Q2 print sits at the centre of a sector-wide debate that has been building for the better part of two years: at what point does a consumer's resistance to price increases become a permanent shift in purchasing behaviour, and can a brand with sufficient scale and distribution power reset the equation through strategic price reductions and innovation? The 2022 – 2024 period of aggressive consumer goods pricing, which Frito-Lay, among others, pursued with remarkable initial success, eventually ran into its natural limit, as consumers reached a value threshold beyond which even strong brand loyalty broke down.

The GLP-1 dimension adds a structural layer that the market is still underweighting in its consumer staples models. GLP-1 drugs (Ozempic, Wegovy, Zepbound and their successors) suppress appetite and reduce caloric intake across all food categories, with snack foods and beverages among the most directly affected. Early data from GLP-1 users show disproportionate reductions in impulse snack purchases, full-sugar beverage consumption and calorie-dense convenience food intake, all categories where PepsiCo has significant revenue concentration.

PepsiCo’s quarter is a chapter in a multi-year story about whether scaled packaged-goods incumbents can re-engineer their portfolios to become cheaper, healthier, higher-protein and more functional, fast enough to defend volume against weight-loss drugs, private label and a value-fatigued shopper, all while an activist investor compresses the timeline. How PepsiCo executes can become the reference case for the consumer-staples complex’s attempt to reclaim its defensive premium in a world where ‘defensive’ no longer guarantees growth.

The bifurcated consumer at altitude. Delta's Q2 earnings represent the first full-quarter post- Iran-conflict stress test for the US airline industry. The question is not simply whether Delta earned $1.43 per share or $1.50. The question is whether the industry's post-pandemic commercial model, built on premium differentiation, corporate travel recovery and loyalty monetisation, is durable enough to absorb a geopolitically-induced cost shock without permanent damage to profitability and demand.

The optimistic interpretation of the quarter, which the Q1 commentary supports, is that Delta's premium revenue base functioned as exactly the shock absorber it was designed to be. Premium travel, corporate contracts and loyalty did not reprice in response to fuel costs; only leisure, economy-class and marginal capacity were affected. If Q2 confirms this, it is a genuine validation of the premium airline investment thesis that Delta, United and their investors have been making for five years. The more cautious interpretation is that the 3.5% capacity cut itself was a signal of structural fragility and that even a best-in-class operator cannot fully protect earnings when fuel doubles in a matter of weeks to $4.30-a-gallon.

Delta also sits at the intersection of two of the season’s most important themes. It offers the clearest early measure of how a fading war premium shifts profit back from Energy to fuel- consuming sectors, reversing the refining windfall seen at the height of the conflict. It also provides a high-profile test of whether the K-shaped premium consumer, which has underpinned the travel and experiences trade, can continue to absorb higher prices.

The resolution of this debate will have implications for how investors price airline equities into an environment where geopolitical risk to energy markets is structurally elevated. The Iran ceasefire has provided temporary relief, but the underlying vulnerability has not been structurally addressed. Delta's Q2 call will set the tone for how the rest of the industry communicates this risk through the remainder of earnings season and into the critical fall booking window.

This week’s preview: the staples volume test and Delta’s oil dividend

Major Earnings on the Docket

▪ PepsiCo is scheduled to report Q2 results before the bell on Thursday, 9 July, with materials posted at 6:00 am EDT and an analyst Q&A at 8:15 am. Consensus calls for EPS of $2.21, up 4.1% from $2.12 a year ago, on revenue of $23.956 billion, implying about 5.4% growth from the year-ago $22.726 billion. The company has exceeded EPS consensus in each of the last four quarters, with an average surprise of 2.7%, so the debate is less about the print itself than about the quality and durability of the recovery underneath it.

There are four drivers for investors to consider. First, Foods North America (PFNA) volume. Q1 was the first genuinely positive data point in a two-year struggle with consumer backlash against pricing. After targeted price resets on the multi-billion- dollar Lay’s, Doritos, Tostitos and Cheetos franchises in February, roughly a fifth of US SKUs cut, and plant and distribution-centre closures across Florida, California and New York - moves directly linked to ‘right-sizing’ pressure from activist investor Elliott Management - PFNA reported 2% volume growth in Q1, its first volume increase in more than two years. Retailers restored shelf space, making Q2 the key test of whether that improvement is durable or merely a one-quarter pull-forward from promotional intensity. Management’s back-half-weighted organic revenue guidance implies Q2 should be solid, though not yet the peak of acceleration. Investors will focus on PFNA unit volume and organic revenue growth. If volumes hold at or above 2% and segment organic revenue improves modestly, it would strengthen the case that PepsiCo’s volume recovery is structural.

Second, beverage weakness and the GLP-1 question. Beverages North America (PBNA) remained a drag in Q1, with volumes down 2.5%, as the segment faces pressure from shifting consumer preferences toward water and functional drinks, the early, but measurable effect of GLP-1 weight-loss drugs on caloric beverage consumption and increased competition from energy drink challengers. PepsiCo’s acquisitions of Poppi, the prebiotic soda brand, and its new distribution agreement for Alani Nu energy drinks are its clearest strategic responses. Q2 will be the first full quarter with Poppi fully consolidated, and management commentary on Poppi’s velocity and shelf performance will be watched as a signal of whether PepsiCo can capture the functional beverage consumer organically or is paying acquisition premiums for a category that may ultimately compete with its core portfolio.

Third, tariff cost absorption and margin management. PepsiCo sources approximately fifteen to twenty percent of its US inputs from tariff-affected supply chains, and the cost of packaging, agricultural commodities and imported ingredients remains elevated despite the partial tariff rollbacks. Management flagged rising geopolitical cost pressure in Q1 commentary and noted that reaffirming guidance required tight cost discipline and continued productivity savings. Q2 gross margin will be the tell: if it expands sequentially despite input cost headwinds, it confirms that the Elliott’s ‘right-sizing’ restructuring is generating meaningful cost savings that flow to the margin line. However, consensus is sceptical as it anticipates a 17.2% operating margin in Q2, unchanged from a year prior, but represents a 150-bps sequential improvement from Q1.

Fourth, the international business as the quiet growth story. While North America has commanded the attention of analysts and media, PepsiCo's international business has been quietly outperforming. Asia Pacific Foods and Europe/Middle East/Africa (EMEA) both posted 9% volume growth in Q1. International operations outpaced North America across nearly every geography, supported by lower market penetration, premiumisation tailwinds and strong Gatorade and Lay's brands in emerging markets. Q2 management commentary on the international segment will be important for the long-term investment case, as it is where PepsiCo's structural organic growth potential is increasingly concentrated.

PepsiCo is among the clearest reads on the value-seeking staples consumer and on whether targeted price investment can re-accelerate volume without permanently impairing margin. A miss, or cautious commentary on the back-half snack recovery, would reinforce concerns that GLP-1s and healthier-snacking behaviour are structural rather than cyclical, with negative read-through for Mondelez, Coca-Cola and the broader packaged-food group.

▪ Delta reports Q2 results before the open on Friday, 10 July. Consensus has pencilled in EPS of $1.54, implying a decline of 26.7% from $2.10 a year ago on the fuel-shock base, with revenue of $17.473 billion, up 12.7% y/o/y. Passenger Revenue per Revenue Passenger Kilometre, or passenger yield, is expected to reach 14.55 cents, up 12.1% y/o/y and 7.5% q/o/q; this measures the average revenue generated per passenger for each kilometre flown. Passenger Revenue per Available Seat Kilometre (PRASK), which measures passenger revenue for every seat flown one kilometre whether occupied or not, is expected to be 12.46 cents, up 12.3% y/o/y and 12.8% q/o/q. Available Seat Kilometres (ASK) are expected to rise 0.8% y/o/y to 125,979 million, following 1.1% growth in Q1.

The single most important variable is the fuel line. It offers a rare clean test. Management’s April Q2 guidance, low-teens revenue growth, a 6%–8% operating margin and EPS of $1.00–$1.50, assumed fuel near $4.30 per gallon, roughly double the prior year, after the Iran-conflict spike added more than $2 billion of quarterly expense across the industry. The interim accord and reopening of the Strait of Hormuz then pushed crude sharply lower mid-quarter. Delta aimed to recover 40% to 50% of that headwind through fare increases, checked-bag fee hikes of $10–$50 per bag, capacity cuts of roughly 3.5 percentage points on lower- margin routes and a $300 million net benefit from its Monroe Energy refinery. The 10 July print will show whether actual Q2 fuel cost per gallon stayed near the $4.30 guide or improved materially, and how much of the headwind Delta recaptured through pricing. Consensus currently has pencilled in fuel cost of $4.05 per gallon.

Second, the premium revenue and corporate travel resilience thesis. Delta's structural advantage in a high-fuel environment is its premium revenue base. In Q1, premium revenue rose 14%, loyalty revenue increased 13%, including more than $2 billion from the American Express partnership, and corporate travel demand grew double-digits year-over-year across key verticals such as banking, technology and aerospace. These high-yield, low-elasticity revenue streams are the demand pools most likely to hold up as fares rise. This is central to the modern Delta thesis: premium cabins, SkyMiles and the Amex co-brand have made the franchise less dependent on main-cabin cyclicality. Q2 should show whether that premium resilience carried through the core summer booking season, as leisure travellers absorb fuel-related fare increases and airlines trim economy-class seats on marginal routes. Management commentary on yield management and Q3 booking- curve data will be an important forward-looking indicator of whether Delta can turn a difficult Q2 into a stronger H2 narrative.

Third, cost discipline and forward guidance. Non-fuel unit costs remain elevated, with consensus expecting adjusted CASM of 14.25 cents, compared with 13.49 cents a year earlier, as labour expenses continue to pressure the cost base. Against that backdrop, the durability of Delta’s capacity discipline and unit-revenue strength will be central. Q1 Total Revenue per Available Seat Mile (TRASM) increased 11.6% y/o/y, and a further 5.4% rise is expected in Q2. Investors will focus on both, Q3 and full-year outlooks, as Delta has maintained its 2026 guidance of $6.50 to $7.50 in EPS and $3 to $4 billion in FCF. The company’s 3.5% reduction to its original Q2 capacity plan was the first material pullback by a major US carrier since the pandemic, giving it industry-wide significance. As the strategic bellwether for US airlines, Delta’s capacity decisions carry read-through implications for United, American, Southwest and regional operators. If management confirms that Q3 capacity will continue to be managed with a ‘downward bias,’ using CEO Ed Bastian’s phrasing, it would suggest that the industry is responding rationally to cost pressure by prioritising yield protection over volume growth.

Finally, Bastian has been explicit that elevated fuel costs, if sustained, will accelerate industry consolidation by pressuring weaker carriers toward mergers or capacity exit. Q2 commentary that revisits or expands on this theme will resonate with investors who believe that the long-term value in airline equity lies in fewer, stronger operators with pricing power, not in undifferentiated market expansion.

A word on banks’ earnings next week

• Banks’ Q2 prints arrive with a rare tailwind: capital-planning clarity. In late June, all 32 institutions passed the Fed’s 2026 stress test, even under a scenario that assumed a record ~$708 billion in hypothetical losses, 10% unemployment, a sharp property-market downturn and a 58% equity-market drawdown. Importantly, the Fed has frozen each firm’s stress capital buffer through September 2027 while it reviews the framework, meaning the results produced no immediate change in capital requirements. Capital-return announcements followed quickly: JPMorgan raised its dividend 10% to $1.65 and authorised a new $50 billion buyback; Goldman Sachs lifted its payout 11% to $5.00; Citigroup increased its dividend 12% to $0.67 alongside a new $30 billion repurchase programme; Wells Fargo raised its dividend 11% to $0.50; and Bank of America said it would announce its plans with results this week.

• Net interest income (NII), the spread between what banks earn on loans and securities and what they pay on deposits, is the foundational driver of large-bank earnings and Q2 represents a pivotal inflection moment. The 2022–2024 rate hiking cycle deposited an enormous amount of ‘locked-in’ yield into bank balance sheets through fixed-rate loans, securities and longer-duration instruments. As the cycle matures and the Fed begins considering normalisation, banks are at different stages of that repricing journey. Bank of America, as the most asset-sensitive large bank, still has significant fixed-rate asset repricing tailwinds flowing through its NII line. JPMorgan, having already cycled much of its fixed-rate book, is managing a more mature NII profile where the focus has shifted toward deposit cost management and loan volume growth. Citigroup's NII is less rate-sensitive due to its international diversification and transaction banking focus. Wells Fargo, operating post-cap removal, is in the earliest stages of deploying freed-up balance sheet capacity into higher-yielding loans. The Q2 NII data from these five institutions, aggregated, provides the most comprehensive picture available of where the US bank sector sits in the interest rate cycle.

• Aggregate credit quality across the US banking system remains benign; charge-off ratios are stable, consumer delinquencies are improving and commercial credit performance is broadly consistent with pre-cycle norms. Beneath that headline stability, however, a growing divergence is likely to become clearer on the large- bank earnings calls. Higher-income households, with annual earnings above $100,000, equity exposure, home equity and relatively stable employment, remain financially healthy and continue to support spending on travel, premium retail and experiences, reinforcing the premium-revenue narratives at Delta and the wealth- management stories at Bank of America and Goldman. By contrast, lower-income households, with limited savings, greater reliance on variable-rate credit cards and higher sensitivity to food and energy prices, are showing early signs of strain, including rising 60 – 89 day card delinquencies at regional banks. The five bank prints on 14 July will provide the most granular, data-rich picture available of how this bifurcation is manifesting at the credit level.

• The capital markets environment in Q2 has been defined by three forces operating simultaneously. First, M&A activity, which was structurally disrupted in Q1 by tariff- related corporate uncertainty and geopolitical risk aversion, has been rebuilding. Deal announcement volumes improved meaningfully through May and June as CEO confidence improved and equity market valuations became more predictable. The technology sector M&A pipeline, encompassing AI infrastructure consolidation, cloud software M&A and data company transactions, is understood to be the most active it has been since 2021. Goldman, JPMorgan, and Citi are positioned at the centre of those mandates. Second, equity capital markets have been recovering from the IPO drought of 2024 - 2025, with the reopening of the IPO window, crystallised by the SpaceX listing. This is a direct catalyst for equity underwriting and the advisory backlog. Third, leveraged finance and debt capital markets have remained robust, as private equity sponsors, sitting on $2+ trillion of undeployed capital in buyout funds, have been using the more stable credit environment to begin the capital deployment and portfolio monetisation cycle that was interrupted by high rates. Together, these three forces should produce a capital markets revenue environment in Q2 that is solidly positive y/o/y for each of the five reporting banks. The key variables to watch are: the pace of M&A advisory fee recognition (which is timing-sensitive and can shift between quarters as deal closings accelerate or decelerate), the performance of Goldman's equities business against Q1's record and whether the overall IB fee pool is building toward an H2 2026 acceleration that would justify the current capital markets recovery premium embedded in bank valuations.