McDonald's (NYSE:MCD) shares fell as much as 10% in after-hours trading Tuesday after the Centers for Disease Control and Prevention (CDC) said the company's Quarter Pounder burgers have been linked to an E. coli outbreak in several states, with most of the illnesses reported in Colorado and Nebraska.
Most of these bacteria are harmless and have a healthy gut effect, according to the Centers for Disease Control. But some strains can cause diarrhea, pneumonia, and can even lead to death from kidney failure.
“Epidemiological data shows that McDonald’s hamburgers are contaminated with E. coli and are making people sick,” the CDC wrote on its website. “This is a preliminary investigation into the outbreak. Most of the people who have been sick reported eating McDonald’s Quarter Pounder burgers, and investigators are working quickly to identify the contaminated food item.”
The CDC said McDonald's has stopped using fresh onion slices and quarterback beef in some states until the source of the contamination is identified.
On the other hand, data indicates that the Relative Strength Index (RSI) indicates that the stock is in an overbought zone. This comes as the stock is trading when the P/E ratio is high compared to the near-term earnings growth.
Recording deaths and hospital admissions
The CDC reported that one person has died from the outbreak, and 10 hospitalizations have been recorded across 10 states.
In an internal memo posted on its website Tuesday evening, Cesar Pena, McDonald's president of North America supply chain, said the company is taking swift and decisive action, noting that initial investigations indicate a cluster of cases may be linked to onion slices used in Quarter Pounder burgers, sourced from a single supplier serving three distribution centers.
The company added: As a result, and in accordance with our safety protocols, all local restaurants have been directed to remove this product from their inventory, and the distribution of all onion slices in the affected area has been suspended.
Meanwhile, the Quarter Pound burger is set to be temporarily removed from restaurant menus in affected areas, including Colorado, Kansas, Utah, and Wyoming, as well as parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and Oklahoma.
Previously: Similar outbreak at Chipotle
In 2015, Chipotle Mexican Grill Inc. (NYSE:CMG) suffered an outbreak of E. coli and norovirus, forcing the company to temporarily close 43 locations in Washington and Oregon. The CDC declared the outbreak over in February 2016, after the company undertook a comprehensive redesign of its food preparation methods.
It took years for Chipotle to regain customer trust and its stock price to recover from the crisis. Since 2016, the company’s stock has risen more than 500%.
