Reynolds Gains Share Amid Flat Earnings and Price Pressures

Date of Call: Feb 4, 2026

Financials Results

• Revenue: $1.03B for Q4, up 1% YOY; $3.7B for FY 2025, up 1% YOY
• EPS: $0.59 adjusted EPS for Q4 vs $0.58 YOY; $1.64 adjusted EPS for FY 2025 vs $1.67 YOY
• Gross Margin: Impact of pricing and cost actions diluted gross margin by 190 bps in Q4, masking underlying improvement
• Operating Margin: Adjusted EBITDA $220M for Q4, up 3% YOY

Guidance:

• FY 2026 net revenues expected down 3% to up 1% vs $3.7B in 2025.
• FY 2026 adjusted EBITDA expected $660M to $675M, roughly flat YOY.
• FY 2026 EPS expected $1.57 to $1.63.
• Q1 2026 net revenues expected down 3% to up 1% vs $818M.
• Q1 2026 adjusted EBITDA expected $120M to $125M.
• Retail branded sales expected at or above category performance (down 2% forecast).
• Non-retail revenue expected flat for FY 2026.
• SG&A expected up in FY 2026 to support innovation and strategic initiatives.
• CapEx expected in low $200s for 2026.

Business Commentary:

Revenue and Share Gains:

• Reynolds Consumer Products reported net revenues of $1.03 billion for Q4, representing 1% growth compared to the previous year's Q4.
• The company outperformed its categories by 2 points in Q4, achieving share gains in six major core categories such as Hefty waste bags and Reynolds Wrap.
• This performance was driven by successful innovation, strategic revenue growth management, and maintaining high service levels.

Profitability and Cost Management:

• The company reported adjusted EBITDA of $220 million, a 3% increase compared to the same period last year.
• Despite retail sales volume declines, manufacturing efficiencies and cost improvements led to increased profitability.
• The dilutive impact of higher commodity and tariff costs on gross margins was offset by effective cost management and pricing strategies.

Strategic Restructuring:

• Reynolds announced a restructuring to consolidate its Hefty Waste & Storage and Presto segments to enhance focus and efficiency.
• This reorganization aims to provide clearer growth opportunities and sharper innovation focus without significant personnel changes.
• The move is expected to improve operational efficiency and better unlock growth opportunities.

Aluminum and Commodity Cost Impact:

• The company faced significant increases in aluminum costs, impacting the foil category.
• Strategic pricing actions were implemented to cover these costs, showing only a 2-point decline in retail volumes despite multiple price increases.
• The pricing strategy, supported by revenue growth management, helped mitigate the impact of rising commodity costs.

2026 Financial Outlook:

• For 2026, Reynolds expects net revenues to be between minus 3% to plus 1% compared to 2025.
• The outlook anticipates retail branded sales at or above category performance, with adjustments for competitive dynamics and potential volume headwinds.
• The company plans to continue investing in innovation and strategic initiatives to drive future growth.

Sentiment Analysis:

Overall Tone: Neutral

• "We closed 2025 with solid fourth quarter execution in what remains a challenging operating environment." "Despite the headwinds, our 2025 progress and momentum position us to deliver stable results in 2026 with adjusted EBITDA roughly flat year-over-year." "We are well positioned as we enter 2026 with the resources and continued willingness to invest in driving earnings growth."

Q&A:

• Question from Kaumil Gajrawala (Jefferies LLC): Can you provide more details on the restructuring of Presto and Hefty, and what success looks like? Is this due to market demand or competitive dynamics?
  Response: The reorganization aims to create clarity and focus by aligning dedicated teams around core categories (waste bags and food bags/storage), enhancing end-to-end management and innovation efficiency, with no major personnel changes.

• Question from Kaumil Gajrawala (Jefferies LLC): Is the foam pressure stabilizing, or will it continue to build?
  Response: Foam volume decline is expected to moderate in 2026 to about half the 2025 rate, driven more by consumer cost considerations than structural regulatory changes.

• Question from Peter Grom (UBS): Can you elaborate on the competitive dynamics in Hefty and the decision to maintain price points? What is embedded in guidance, and would you shift strategy if volume declines worsen?
  Response: Competitive promotional activity increased in the waste category; the company will maintain its brand equity-focused strategy and price points, taking comfort in past outperformance, with guidance already factoring in some continued success but not at last year's high rate.

• Question from Peter Grom (UBS): How are you thinking about elasticities for aluminum foil given the January price increase and potential future increases?
  Response: Measured quarterly price increases, tight private label gaps, and consumer focus on recent purchase cycles have muted elasticities so far, but risk increases with each subsequent raise.

• Question from Andrea Teixeira (JPMorgan Chase & Co): How is private label performing, and how should we think about mix impact in the guidance?
  Response: Private label bid activity is high due to the macro environment, creating near-term headwinds, but wins in branded and store brand formats are expected to offset losses later in the year, with branded mix likely increasing in 2026.

• Question from Lauren Lieberman (Barclays Bank PLC): Can you clarify the SG&A dynamics, particularly delayering and advertising optimization?
  Response: SG&A reduction in 2025 was driven by structural delayering and optimizing advertising ROIs; 2026 increases will be for innovation support, with variable compensation also a factor.

• Question from Lauren Lieberman (Barclays Bank PLC): What is the outlook for commodity cost inflation and its gross margin headwind, and how will pricing flow through?
  Response: Commodity cost headwind expected to be 2-3 points in 2026, similar pricing offset planned, with margin dilution from pricing actions expected again, but profitability improvement anticipated despite retail volume declines.

• Question from Robert Ottenstein (Evercore ISI): Is the Hefty-Presto combination more strategic/efficiency-driven rather than cost-driven?
  Response: Yes, the reorganization is execution and growth-focused, not primarily cost-driven, aiming to unlock better returns with the same resources.

• Question from Robert Ottenstein (Evercore ISI): What drove the broad Q4 market share gains, and will it continue into 2026 with increased shelf space?
  Response: Share gains were broad across six major categories, driven by innovation, performance brand philosophy, service levels, and value perception; January trends show continuation, with distribution points up in Q4 and optimism for shelf space discussions with retailers.

• Question from Brian McNamara (Canaccord Genuity): How does current aluminum foil elasticity compare to 2022, and has the $5 price point threshold moved?
  Response: Elasticities appear more muted now due to tighter private label gaps, higher general inflation providing price insulation, and quarterly pricing cadence; the company continues to monitor and study the category closely.

Contradiction Point 1

Foam Category Volume Decline Outlook

Expectations for the rate of volume decline in the foam category for 2026 are presented as contradictory.

Is the foam category nearing stabilization, or will pressure continue to rise? - Kaumil Gajrawala (Jefferies)

2025Q4: For 2026, the company expects a decline at roughly half that rate [of 2025's 14%]. - Scott Huckins(CEO)

What is the line of sight for stabilization in the tableware business, including the size of the foam segment and its projected impact over the next 12 months? - Lauren Lieberman (Barclays)

2025Q3: Foam headwinds will be less in 2026 as the company comps against a year of foam sales in 2025. - Scott Huckins(CEO)

Contradiction Point 2

Competitive Dynamics in Hefty Waste Bags

The characterization of competitive activity impacting the Hefty waste bag business is inconsistent between quarters.

How are competitive dynamics in the Hefty waste bag business affecting your pricing and promotion strategy decisions? - Peter Grom (UBS)

2025Q4: A competitor increased promotional and pricing activity in the waste bag category exiting 2025. - Scott Huckins(CEO)

What do you expect for promotional efforts and consumer behavior during the holiday season? - Robert Ottenstein (Evercore ISI)

2025Q3: Promo intensity in waste bags... is in line with pre-pandemic levels and supports strong retail performance. - Scott Huckins(CEO)

Contradiction Point 3

Commodity Cost Headwind and Pricing Recovery

The expected pricing recovery to offset commodity costs appears inconsistent.

What is the expected commodity inflation headwind on 2026 gross margin, and how will pricing impact it? - Lauren Lieberman (Barclays)

2025Q4: Commodity cost headwind is estimated at 2–3 points, with a similar amount of pricing planned to offset it. - Nathan Lowe(CFO)

Could you explain the gross margin trends, pricing schedule, and elasticity assumptions in the guidance, and clarify the top-line outlook for trash and food bags? - Andrea Teixeira (JPMorgan)

2025Q2: The full-year guidance assumes 2-4 points of cost headwinds from commodities/tariffs, matched by 2-4 points of pricing recovery. - Nathan Lowe(CFO)

Contradiction Point 4

Private Label Share Activity and Outlook

Contradiction on whether private label share is stable or growing, and its impact on guidance.

What impact is private label activity (Hefty, Presto) having on your business and guidance mix? - Andrea Teixeira (JPMorgan)

2025Q4: Overall category brand/store brand mix has been remarkably stable. The Presto private label business...has seen pronounced growth. - Scott Huckins(CEO)

What are your pricing mechanics for aluminum foil and the lag between pricing with customers and shelf availability? Do you expect private label to gain share in this environment? - Brian McNamara (Canaccord Genuity)

2025Q1: Private label share is stable overall. In Q1, store brands actually lost share in RCP's three largest categories... - Scott Huckins(CEO)