In the fourth quarter, results from the personal care and beverage sector are expected to be largely predictable, though companies are likely to issue cautious long-term guidance amid continued softness in U.S. consumer spending.
Within the beverage category, Citi Research leans more positive towards Celsius Holdings (CELH) and PepsiCo (PEP), while in personal care, Citi favors Estée Lauder (EL) given solid momentum in Asia and improving U.S. trends.
PepsiCo (PEP) is first out of the gate, reporting before the market open on February 3. Concurrent with the company’s announcement regarding its strategic priorities agreement with Elliott Management, PepsiCo (PEP) reiterated FY25 guidance and provided initial FY26 outlook. This leads Citi Research to anticipate in-line Q4 results with sequential improvement at PepsiCo Foods North America (PFNA) expected to be viewed positively by the market.
Margins, however, could be pressured by the impacts from aluminum tariffs and volume deleverage, especially in PFNA with Citi predicting 80 basis points of compression to gross margin for the parent company. By segment, Citi expects PFNA operating margin to decline 160 basis points on volume deleverage, while PepsiCo Beverages North America (PBNA) should see a 150-basis point margin expansion thanks to recent pricing actions and the cycling of easier comparable sales in the fourth quarter of 2024.
Citi expects a “noisy” fourth quarter for Celsius (CELH) given pressures on the company’s topline and margins from the Alani Nu distribution transition, higher tariff impacts, seasonal distributor cash management activities, and the ongoing integration of the Rockstar brand. However, the firm retains a positive short-term view of the stock in respect of accelerating trends and new flavors for Alani Nu into the summer of 2026.
Pressure on the company’s margins likely remained in Q4 due to promotions, higher scrap and freight from the Alani Nu distribution integration, and increased tariff pressure. However, the company said it expects gross margin to re-expand in the first quarter of 2026 as Alani Nu and Rockstar Energy get further integrated into the CELH system.
Within the HPC space, Estée Lauder (EL) continues to gain momentum from depressed quarters in travel retail and China and shows “executional improvements resulting in further market share gains having established momentum in recent quarters,” Citi says.
Additionally, Citi thinks there is “positive setup for fiscal second quarter 2026 and sees increasing evidence of improving category trends, which will lead to raised FY26 organic sales growth/EPS guidance,” which will ultimately lead to increased confidence in Estee Lauder’s sustainable recovery and further gains in the share price.
Citi Research maintains a Buy rating for Celsius Holdings (CELH) and PepsiCo (PEP) with a Hold rating for Estée Lauder (EL) with a 9% bump to its price target to $120.