McDonald’s shares slide in wake of fatal E. coli outbreak. What to know

McDonald’s shares dropped nearly 6% in premarket trading on Wednesday after an E. coli outbreak linked to its Quarter Pounder burgers resulted in one death and 49 illnesses across the U.S.

The outbreak, reported in 10 states, has led to at least 10 hospitalizations, according to the U.S. Centers for Disease Control (CDC). Cases began appearing in late September and continued into October.

“This public health scare is the last thing McDonald’s needs, especially since it’s already struggling to boost growth,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

The outbreak was caused by the E. coli O157:H7 strain, the same type involved in a deadly 1993 incident at Jack in the Box that killed four children. McDonald’s initial investigation suggests the outbreak may be linked to slivered onions used in the Quarter Pounder, sourced from a single supplier serving three distribution centers.

Past E. coli outbreaks have had serious financial consequences for restaurant chains. Chipotle Mexican Grill struggled for a year and a half to recover from a 2015 outbreak, while Jack in the Box experienced four consecutive quarters of declining sales following the 1993 incident, according to Raymond James analyst Brian Vaccaro.

McDonald’s is already facing challenges, including a surprise decline in global sales in July—its first quarterly drop in over three years—as consumers resisted its higher-priced menu options. Analysts believe the outbreak could put additional pressure on the company’s fourth-quarter sales, though it is too early to predict whether the impact will be as severe as the past outbreaks.

J.P. Morgan analysts noted that McDonald’s swift response—identifying the source of the contamination and replenishing supplies—should mitigate further damage. They added that the outbreak is unlikely to spread across the U.S. or impact international markets significantly.

In response, McDonald’s has removed the affected slivered onions and beef patties from its restaurants and temporarily halted Quarter Pounder sales in the impacted regions.

BMO Capital Markets analyst Andrew Strelzik suggested the sales impact could be short-lived. “While it is early, historical precedent indicates that comparable sales pressures can bottom out quickly and remain temporary, assuming no further incidents,” he said.

The outbreak comes at an unfortunate time for McDonald’s, just as U.S. comparable sales were beginning to pick up following the release of its $5 value meals.