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McDonald's Q2 US comp sales cause concerns; anti-bias training hits Starbucks Q3

TOP NEWS

* Results from McDonald's Corp. largest single market are causing concerns for investors despite the fast-food chain beating analysts' estimates for adjusted EPS and revenue. Comparable sales in the U.S. for the quarter ended June 30 grew 2.6%, a slower pace than the 3% or more that many analysts predicted ahead of the restaurant chain's second-quarter earnings results. Meanwhile, the restaurant giant reported adjusted EPS of $1.99 for the quarter, a 15% year-over-year increase and above the S&P Capital IQ mean consensus estimate of $1.92, while revenue grew 12% over the year-ago period to $5.35 billion but beat an estimate of $5.32 billion.

* Closing more than 8,000 U.S. stores for anti-bias training in May shaved 2 cents off Starbucks Corp. third-quarter adjusted EPS and is expected to trim 3 cents off the full-year figure, the chain's executives said during a call to discuss third-quarter results. For the quarter ended July 1, the global coffee giant reported adjusted EPS of 62 cents, up 13% year over year and beating S&P Capital IQ mean consensus estimate for normalized EPS of 60 cents. Net revenue for the third quarter came in at $6.31 billion, up 11.5% from the year-ago period.

FOOD RETAIL & DISTRIBUTION

* Supermarket supplier United Natural Foods Inc. is planning to acquire wholesaler and grocer SuperValu Inc. for $2.9 billion, a deal that gives UNFI a larger share of the increasingly competitive grocery supply market. Under the proposed deal, United Natural Foods, or UNFI, will shed SuperValu's retail assets, which include five banners that operate in the Midwest and mid-Atlantic regions. UNFI will also take on SuperValu's outstanding debt and other liabilities. The companies expect the deal to close during the fourth quarter of the 2018 calendar year.

* Carrefour SA said it is on track to achieve targets under its Carrefour 2022 transformation plan, which the French supermarket operator adopted in January to counteract declining hypermarket sales, after seeing progress in the first half of 2018. Carrefour confirmed all the objectives it set under the turnaround plan, including achieving an annual capital expenditure of €2 billion in 2018 and cutting operating costs €2 billion annually by 2020. The plan also includes disposing of nonstrategic real estate assets for €500 million by 2020 as well as achieving €5 billion in food e-commerce sales and €5 billion in organic products sales in 2022. For the first half of the year, the supermarket chain grew 5.8% in operating profits due to strong international sales despite sluggish performance in its home market due to increased competition.

* Amazon.com Inc. CFO and Senior Vice President Brian Olsavsky is bullish on the company's international business, even though the e-commerce giant posted another operating loss in the division for the three months ended June 30. For second-quarter 2018, Amazon reported its highest ever quarterly net profit at $2.53 billion, almost double the S&P Capital IQ mean consensus estimate for GAAP net income of $1.25 billion, while diluted EPS came in well over analysts' expectations at $5.07. The company's international division, however, reported a net loss at $494 million for the quarter, an improvement from an operating loss of $724 million in the year-ago quarter.

PACKAGED FOODS

* Fonterra Co-op Group Ltd. said that John Wilson will step down as its chairman with immediate effect due to health concerns, to be replaced by John Monaghan, who has been a Fonterra director since 2008. Wilson, who underwent surgery last month, will remain the New Zealand-based dairy cooperative's director until he retires from the board at Fonterra's annual general meeting in November.

* Hershey Co. will make enhancements to its strategy, including a 2.5% price hike on one-third of the company's product portfolio, in order to address gross margin headwinds and offset operational costs, CEO Michele Buck told analysts during Hershey's earnings call. The U.S. chocolate company added that it now expects GAAP EPS for full-year 2018 to be between $4.76 and $4.96 but still guided to adjusted diluted EPS for the year to be between $5.33 and $5.43. Hershey also updated its net sales outlook for the year to increase toward the low end of the updated 3.5% to 5.5% range to reflect its divestment of Tyrrells and, most recently, of Shanghai Golden Monkey Food Co. Ltd.

* Danone posted higher earnings for the first half of 2018 on the back of sales growth momentum, strong margin improvement and improved free cash flow, despite ongoing volatility and unexpected headwinds in some markets. The French packaged foods producer reported that recurring EPS increased 4.6% year over year to €1.76 from €1.68 in the year-ago half, slightly ahead of the S&P Capital IQ's consensus normalized EPS estimate of €1.75. The company's group share of first-half net income came in at €1.20 billion, up from €975 million in the same period in 2017, but lower than the S&P Capital IQ consensus estimate of €1.22 billion.

RESTAURANTS

* Dunkin' Brands Group Inc. extended its partnership with mobile wallet provider CardFree that grants the operator of Dunkin' Donuts and Baskin-Robbins perpetual license over software used in operating the company's mobile ordering and payment software for its U.S. donut chain.

* Papa John's International Inc. former chairman John Schnatter filed a lawsuit against the pizza chain that he founded, claiming the company had not responded sufficiently to an earlier request for internal documents to inspect allegations of inappropriate behavior, Reuters reported. In a statement, Schnatter's lawyers said they want to inspect company documents because of the company's "unexplained and heavy-handed" treatment toward Schnatter following the publication of a report that accused the Papa John's founder of using a racial slur.

* Hillhouse Capital and KKR & Co. joined the list of companies bidding for a potential acquisition of Yum China Holdings Inc., a transaction that can go for about $14 billion, Bloomberg News reported, citing people familiar with the matter. The private equity firms are in discussions with banks about funding for a potential purchase of the restaurant operator, sources told the news agency, adding that bidders may form alliances for a joint offer to buy Yum China.

* Chipotle Mexican Grill Inc. reported an 8.3% rise in its revenue to $1.3 billion in the three months ended June 30, driven mostly by 34 new restaurants openings, a 4% menu price increase and customers adding queso. The fast-casual restaurant chain posted adjusted diluted EPS for second-quarter 2018 of $2.87, an increase of 23.7% from $2.32 in the same period a year earlier and beating the S&P Capital IQ consensus normalized EPS estimate of $2.81. Net income decreased 29.7% year over year to $46.9 million, which includes an after-tax impact of $33.4 million in expenses related to restaurant asset impairment, corporate restructuring and certain legal costs.

BEVERAGES

* Ambev SA posted year-over-year growth in second-quarter earnings that narrowly missed market expectations, but the Brazilian brewer's shares still jumped as it reported higher revenue that topped estimates. The company reported profits of 2.42 billion Brazilian reais in the quarter ended June 30, up 14.1% from 2.12 billion reais a year ago, while EPS grew to 15 centavos from 13 centavos. Normalized profit in the quarter came in at 2.35 billion reais, up from 2.14 billion reais a year earlier.

TOBACCO & SMOKING PRODUCTS

* Altria Group Inc. said its second-quarter earnings and revenues decreased year-over-year as the cigarette producer's volumes of domestic shipments and share of the smokable-products market continue to decline. Adjusted diluted EPS for the six months ended June 30 came in at $1.01, up from 85 cents and higher than the S&P Capital IQ consensus normalized EPS estimate of $1.00. Domestic cigarette shipment volume declined 10.8% due to trade inventory movements, the cigarette industry's rate of decline and retail share losses, while total cigarette retail share of the company's smokable products declined by 0.7 share points to 50.2%.

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The day ahead

Early morning futures indicators pointed to a higher opening for the U.S. market.

In Asia, the Hang Seng increased 0.08% to 28,804.28, and the Nikkei 225 rose 0.56% to 22,712.75.

In Europe, around midday, the FTSE 100 was up 0.58% to 7,707.50, and the Euronext 100 was up 0.24% to 1,078.64.

On the macro front

The GDP report, the consumer sentiment report and the Baker-Hughes Rig Count report are due out today.

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