The E.Coli outbreak at fast food giant McDonald’s (MCD) is not doing it any favors. Already hampered by price concerns and declining quality, the potential of a food-borne illness is an insult to injury. A new report suggests this may mean trouble for McDonald’s sales in the near term, but investors shrugged off the reports and sent shares up nearly 1.5% in Monday afternoon’s trading.
McDonald’s third-quarter results are set to emerge on Thursday, and a report from Reuters says that the recent hit from the E.Coli outbreak could worsen an already unpleasant picture of McDonald’s overall sales. The outbreak is already responsible for one death and 75 total infections, which sent McDonald’s shares on a fairly steep decline.
David Tarantino, an analyst with Robert W. Baird, was sufficiently concerned to lower the rating on McDonald’s stock to Neutral, noting that the longer the outbreak went on, the more likely it was to do damage. But given reports that the Quarter Pounder is back on the menu—minus its onions—the impact may not be as bad as Tarantino believed at first glance.
Passing the Buck(s)
Meanwhile, McDonald’s has been the target of a lot of ire over hiked prices of late, but the firm is not taking the blame for that. At least, not alone. It, like several other companies, is taking aim at the United States’ top meatpackers in a bid to get pricing under control.
A Quartz report noted that McDonald’s has joined in a slate of lawsuits targeting the four largest meatpackers in the United States over beef prices, which have been running well ahead of inflation for around the last 10 years now. The lawsuits in question have been consolidated, and a federal court in Minneapolis will now take the matter on.
Is McDonald’s Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on MCD stock based on 17 Buys and 11 Holds assigned in the past three months, as indicated by the graphic below. After a 16.83% rally in its share price over the past year, the average MCD price target of $314.58 per share implies 5.97% upside potential.
