McDonald's Can't Be Eaten Anymore" – E. coli Shock Causes Revenue Drop but Stock Soars

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Despite a disappointing fourth-quarter report due to E. coli contamination, McDonald’s stock surges as 2025 recovery is anticipated.

In the fourth quarter of 2024, McDonald's revenue failed to meet market expectations, primarily due to the impact of an E. coli outbreak that had severe consequences for its U.S. operations. Despite this setback, McDonald's stock price surged by 4.8% as the company’s management projected a strong revenue recovery in 2025.

The fast-food giant reported a fourth-quarter revenue of $6.38 billion (9.25 trillion KRW), which fell short of analyst predictions of $6.44 billion, according to data from LSEG. However, McDonald’s earnings per share (EPS) were in line with expectations at $2.83, while net income for the quarter dropped by 1%, amounting to $2.01 billion.

The same-store sales growth in the U.S. for the fourth quarter saw a 1.4% decrease, exceeding Wall Street’s forecasted drop of 0.6%. This was largely attributed to the E. coli outbreak that affected specific regions, particularly the Rocky Mountain area. The significant revenue loss in the U.S. was partially offset by a boost from international markets, where McDonald’s saw positive results in its international developmental license market. In the Middle East, Japan, and other regions with licensed partners, sales from comparable stores increased by 4.1%. Similarly, the company reported a slight 0.1% increase in same-store sales in Western Europe, Canada, and Australia.

Amid slowing sales in the first half of the year, McDonald's introduced a popular "$5 Meal" promotion in June, which was extended through December. However, analysts suggested that while the promotion helped drive traffic, it failed to significantly boost long-term order volume. The company’s executives dismissed these concerns, stating that the average order value for the $5 Meal was over $10, implying a successful upsell despite the initial lower-priced offering.

Looking ahead, McDonald's management expects a recovery in U.S. sales starting from the second quarter of 2025, as the E. coli-related issues were primarily confined to the Rocky Mountain region. They also plan to stimulate growth with the return of discounted menu items, the reintroduction of snack wraps, and the launch of a new chicken strip menu. Additionally, McDonald’s Chief Financial Officer, Ian Borden, noted that the first quarter of 2025 could see the lowest sales due to external factors such as winter storms in the U.S. and wildfires in California, which are expected to impact store visitation rates.

In an effort to maintain growth, McDonald’s has aggressive expansion plans for 2025. The company aims to open approximately 2,200 new stores globally, with a significant focus on China, where 1,000 new locations are set to open. This expansion, alongside the company’s recovery strategy and new product launches, is expected to position McDonald’s for a strong rebound in 2025, driving both revenue growth and stock performance.

The combination of McDonald’s international success, strategic promotions, and forecasted recovery has led to investor optimism, pushing the company’s stock price higher despite the challenges faced in the previous quarter.

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