Wedbush views McDonald’s, Chipotle outbreak comparisons as ‘misplaced’

Commenting on the CDC report suggesting that an E. coli outbreak has been linked to McDonald’s (MCD) Quarter Pounders, Wedbush analyst Nick Setyan says the firm believes the company is well positioned to contain quickly, and any impact likely much more limited than Chipotle’s (CMG). McDonald’s response implies the illnesses are linked to slivered onions used in the Quarter Pounder and come from “a single supplier that serves three distribution centers.” Unfortunately, Wedbush doesn’t expect the full extent of infections to be relatively clear for another two weeks. At peak impact, Chipotle saw same-store sales growth down 29.7% and saw EBITDA decline to $181M in 2016 from $894M in 2015. As a franchised, global concept, the firm expects a relatively insulated impact limited to McDonald’s domestic business, if not to the few impacted states. Second, Wedbush believes McDonald’s has the scale and expertise to respond and contain far more quickly than Chipotle at the time. Third, Chipotle’s brand identity was synonymous with the quality of its offering with a very different customer set, the firm adds. Wedbush has an Outperform rating on McDonald’s with a price target of $295.