The K-shaped economy has winning stocks on both ends of the K. The upper arm of the K includes the high-end, luxury consumer companies that appeal to the wealthy. This segment of the consumer sector has benefited as the stock market has risen and home values have increased over the past five years. The lower leg of the K also has produced winners. The mass consumers, supported by a low unemployment rate, continue to prove their resilience despite the challenges of inflation and affordability. Even so, all consumers are watching wallets closely and choosing wisely how to direct their spending. For this week's list, we look at BUY-rated stocks that we see as winners of the K-shaped economy. The price performance noted is year to date.

AI is helping lift profits at consumer companies on multiple levels. It allows companies to better understand their customers, which can improve target marketing and customization. Companies can hone menus, goods, and services to achieve broader appeal and to reach new audiences. Consumer companies are also harnessing AI technology to help with processes, inventory control, and supply-chain management, and in many other ways. By way of examples, restaurants are using smart robots to take orders, and prep and serve food. They also have front and back offices, and AI is helping make both more efficient and cost effective. As well, consumer companies utilize a lot of data, and AI helps elevate the use of that data. We recently concluded our five-part webinar series on AI, looking at how different industries are using AI. Our final event spotlighted consumer companies. For this week's list, we offer details on the BUY-rated stocks we highlighted during the webinar.

The calendar first-quarter 2026 earnings season is essentially over and can formally and officially be declared "a doozy." With 95% of S&P 500 constituent companies having reported results, first-quarter 2026 earnings are up in the range of 30% from the year-earlier quarter. That makes the earnings growth rate for 1Q26 the highest since 4Q21. Earnings have now grown on a year-over-year basis since mid-2023 --and typically at a high-single or low-double-digit pace. That's impressive. But what has been keeping earnings growing so steadily through inflation, macro-economic pressures, and geopolitical turbulence? The two-prong answer is revenue growth and margin expansion. Annual revenue growth has accelerated from a mid-single-digit rate in recent years -- and for the 1Q26 EPS season, top-line growth was about 11%. Meanwhile, net profit margin is running at least a point above the long-term average of 12%. This expansion partly reflects the increasing impact on overall profits of the high-margined sectors such as Information Technology. Yet all companies across all sectors have been through a lot in recent years, and, along the way, have learned how to run leaner, source raw materials optimally, and (wherever possible) turn fixed costs into variable costs. We believe the strong margin performance will carry past the first quarter of 2026. We have adjusted our EPS forecasts to account for the overall level of earnings acceleration across much of the broad economy related to AI investments. By the numbers, our 2026 and preliminary 2027 EPS forecasts are now $340, implying year-over-year growth of 25%, and $390, which implies another year of double-digit EPS growth.

The first-quarter earnings season has been sensational. Many companies knocked it out of the park when delivering earnings and revenue numbers that well beyond expectations. With reports now in from about 96% of S&P 500 companies, earnings have climbed a staggering 29% from last quarter. Information Technology, up 56%, and Communication Services, up 51%, have led the pack. At the bottom are Healthcare, down 3%, and Energy, down 1%. With earnings season essentially over, we have had a chance to look at trends. In particular, we watch for companies that raised guidance as we view that action as a likely catalyst for market-beating returns in the quarters ahead. It's even harder for companies to raise guidance during uncertain economic times, as vision is murky. The following is a partial list of companies in Argus' Fundamental Universe of Coverage where management raised its outlook during the 1Q26 reporting season.