McDonald’s E. coli outbreak update: MCD stock price plummets after CDC food-safety alert about Quarter Pounders

It’s been a horrible 24 hours for fast-food giant McDonalds. Yesterday, the Centers for Disease Control and Prevention (CDC) announced that it was conducting a “fast-moving” outbreak investigation into the chain after 49 people became ill with E. coli and one person died after eating at some McDonald’s restaurants. Here’s the latest.

McDonald’s E. coli outbreak update

Yesterday the CDC issued a food-safety alert after discovering that McDonald’s iconic Quarter Pounder burgers appeared to be making people sick. The location of those illnesses has spanned 10 states so far, with the majority of cases happening in Colorado and Nebraska. Of the known 49 cases, 10 people were hospitalized and one person died.

As of the time of this writing, the CDC has not released any updated information about its investigation. Yesterday’s notice said that the agency did not know the source of the E. coli contamination—whether it was the Quarter Pounder’s beef patty or another ingredient on the sandwich. But the same notice reported that McDonald’s had stopped using fresh slivered onions in addition to the beef patties in several states.

McDonald’s stock takes a beating

The market has not reacted well to the news that McDonald’s could have a major E. coli crisis on its hands. As of the time of this writing, McDonald’s stock (NYSE: MCD) is currently down over 7% to $292.51 in premarket trading. The stock had closed at $314.69 yesterday before the news of the investigation became public.

Before yesterday’s drop after the closing bell, McDonald’s stock had been up nearly 6% year-to-date. MCD shares had hit an all-time closing high of over $316 per share just last week.

News of the E. coli outbreak has already caused concern among some analysts. As first reported by The Fly (via TipRanks), Baird has downgraded MCD from Outperform to Neutral, dropping its price target for the stock from $320 per share to $290 per share.

Others appear less worried. Morningstar analyst Sean Dunlop wrote on Wednesday that the outbreak should be “quickly contained.”

McDonald’s, meanwhile, has emphasized that other menu items aren’t impacted. “The initial findings from the investigation indicate that a subset of illnesses may be linked to slivered onions used in the Quarter Pounder and sourced by a single supplier that serves three distribution centers,” Cesar Piña, the company’s North America chief supply chain officer, said in a statement.

At the same time, apprehension among analysts and investors is understandable right now.

The specter of Chipotle’s E. coli outbreak

In 2015, burrito giant Chipotle Mexican Grill (NYSE: CMG) experienced what was probably the worst crisis in the chain’s history: a major E. coli outbreak. At the time of the outbreak, the stock had been a Wall Street darling. But as news of the outbreak spread—and once loyal customers now feared eating there, the stock plummeted.

As Trefis reported nearly a year after the incident first occurred, the E. coli outbreak saw Chipotle’s stock price drop by over 45%. (You can read Fast Company’s in-depth report on Chipotle’s E. coli scandal here.)

Chipotle has more than bounced back since then—its stock is up 279% since 2019—but it took a long time to recover.

Given how badly Chipotle’s E. coli outbreak derailed the company (and it’s stock price), it’s no wonder investors seem to be punishing McDonald’s this morning leading to the significant price drop in MCD stock.

It’s still too early to tell whether McDonald’s E. coli outbreak will be as significant a crisis as Chipotle’s was—and whether MCD stock could take as severe a beating as Chipotle’s did. What will determine that is likely how widespread McDonald’s outbreak ends up being, how the company reacts to it, and how badly customers’ confidence is shaken by the event.

Disclosure: Morningstar is owned by Joe Mansueto, who also owns Fast Company.