What investors need to know about the McDonald’s E. coli outbreak

McDonald’s (NYSE:MCD) disclosed on Tuesday that initial findings from an investigation into an E. coli outbreak 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. The restaurant chain said that in line with its safety protocols, all local restaurants have been instructed to remove the product from their supply, and McDonald’s (MCD) has paused the distribution of all slivered onions in the impacted area. The Chicago-based company also temporarily removed the Quarter Pounder from restaurants in the impacted area, including Colorado, Kansas, Utah and Wyoming, as well as portions of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and Oklahoma.

The CDC said the outbreak involved 49 incidents across ten states, with one death and 10 hospitalizations being reported. The person who died after contracting E. coli was described by Colorado health officials as being “older” and with underlying conditions.

On Wall Street, TD Cowen analyst Andrew Charles said the firm’s quick franchisee checks suggested McDonald’s (MCD) is on top of the issue and that it seems largely contained. Charles said it is only natural to expect a short-term impact on sales. Based on the food contamination analogies of Chipotle (CMG) in 2015 and Jack in the Box (JACK) in 1993, Charles and his team estimate that every 1% annualized change in U.S. same-store sales will lead to a $0.09 EPS impact. TD Cowen sees a worst-case scenario hit to Q4 EPS of $0.37.

Shares of McDonald’s (MCD) fell 5.8% in postmarket trading on Tuesday.