Those classic golden arches mean something different to everyone: a terrifying clown that haunted our childhood nightmares, surprisingly bland chicken nuggets, and now, E. coli.
McDonald’s is the latest fast-food chain to accidentally serve up pathogens to its customers.
The Centers for Disease Control and Prevention announced that 10 people have been hospitalized and one person died after eating a McDonald’s Quarter Pounder hamburger. The culprit? Slivered onions infected with E. coli used to garnish the burger.
Shares dropped 5.16% today.
Will your portfolio be contaminated?
McDonald’s has (obviously) been on a PR blitz since the news broke yesterday. The chain has paused offering the Quarter Pounder, one of its most popular products, at about a fifth of its national locations, and executives have assured customers that the infection was likely from just a single supplier.
The outbreak comes on the heels of an already tough time for the chain.
In July, the company reported a decline in global sales for the first time in three years. Higher prices, driven by inflation, began to scare away customers who go to McDonald’s for its famously cheap meals. The company has rolled out a new under-$5 menu to win back market share, but infecting customers with a deadly disease will probably be a bit of a setback.
A McNugget of good news
But analysts are forecasting that this outbreak will play out more like Wendy’s than Chipotle’s.
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Back in 2022, Wendy’s lettuce caused an E. coli outbreak, but the contagion was minimal given because the company caught the supplier early on. Compare that with Chipotle, which had a string of high-profile outbreaks related to its meals over multiple years in the 2010s—sending shares plummeting 35% between 2015 and 2018.
“MCD's immediate response and identification of the source of the outbreak underscore the company's sophisticated supply-chain infrastructure and should help mitigate additional risk of spread, " wrote Deutsche Bank analyst Lauren Silberman, who maintained her “buy” rating on the firm, in a note today.
The bottom line…Overall, even in more high-profile cases of food-related illness such as Chipotle’s, shares do eventually recover if the company’s balance sheet is fundamentally healthy—like McDonald’s is.
According to a Wall Street Journal overview, the median analyst price target for McDonald’s is $321—roughly 7% higher than shares trade for today. Of the 38 analysts covering the company, not a single one rates the company a “sell.”
We get it if you want to steer clear of McDonald’s for a while—but long-term, the stock is still appetizing.—LB