McDonald's Is Not Clowning Around With Superbugs

In mid-September, a total of 511 laboratory-confirmed cases of Cyclospora infection – likely tied to McDonald’s salads – were reported in 15 states and New York City, according to the results an investigation conducted by the FDA, CDC and state and local officials.

Other recent outbreaks related to fast food chains, include two instances of E-coli infections in late 2015, which were tied to Chipotle Mexican Grill. The illnesses affected a total of 60 people across several states, with 22 having been hospitalized.

Shaking-up the menu

While McDonald’s has been active in providing healthier menu items, other initiatives may be more instrumental in buoying the upswing in its stock.

Gimme Credit analyst Carol Levenson recently noted that McDonald’s had removed artificial flavors, colors and preservatives in its ‘classic’ burgers, which follows other, similar changes “to promote a healthier, higher quality, and more natural image.” These changes include using fresh (not frozen) beef in the Quarter Pounder, moving to cage-free eggs, and removing artificial preservatives from its Chicken McNuggets.

Levenson said she doubts “whether these moves alone would bring back a lapsed customer,” but remodeling and operational changes, including self-order kiosks, its mobile app, and delivery, are “increasing the average check, which is contributing to higher comparable sales growth.”

In the third quarter of 2018, global comparable sales at McDonald’s rose 4.2% year-on-year, reflecting a 2.4% increase in the U.S. and 5.4% in its international markets, mainly driven by performance in the UK, Australia and France.

Shareholders have generally been upbeat about McDonald’s refranchising initiative and nutritional direction. However, its competitors appear to be lagging, stoking some speculation in the market that other fast food chains may follow McDonald’s lead – at least in offering healthier menu items and contributing more visibly to AMR-related efforts.

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Disclosure: The author does not hold any positions in the financial instruments referenced in the materials provided.

The analysis in this material is provided for information only and is not ...

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