The number of possible E. coli cases related to Taco Bell restaurants passed 100, prompting two analysts to reduce their ratings on the stock of parent Yum! Brands Inc.
The shares were lowered by Wachovia Securities Inc. and RBC Capital Markets Corp. yesterday because of the possible impact on sales. State and local health departments have reported at least 137 cases of E. coli since the beginning of this week, with the majority of the cases in New York and New Jersey.
Six states including Pennsylvania, Delaware, South Carolina and Utah have confirmed patients, according to state health departments and federal authorities. The outbreak may cut into Taco Bell’s sales at restaurants open at least a year as customers stay away, analysts said.
“We think there could be a short-term, although potentially significant, negative sales impact at Taco Bell,” wrote Jeff Omohundro, an analyst at Wachovia in Richmond, Virginia, who cut the stock to “market perform” from “outperform.” Larry Miller, an analyst with RBC Capital Markets, reduced his recommendation to “sector perform” from “outperform.” Shares of Louisville, Kentucky-based Yum fell $1.54, or 2.5 percent, to $59.54 at 12:23 p.m. in New York Stock Exchange composite trading. The stock has risen 26 percent this year.
E. coli food poisoning linked to Taco Bell restaurants sickened 58 people, the U.S. Centers for Disease Control and Prevention reported yesterday. It only counts confirmed cases.
Taco Bell on Dec. 6 removed green onions at all of its 5,982 restaurants in the U.S. and Canada after a preliminary test of three samples of the onions found them to be “presumptive” positive for E. coli O157:H7. That is the most dangerous strain of the bacterium.
Boskovich Farms Inc., a vegetable supplier in Oxnard, California, sold bulk green onions to the chain’s processors.
New Jersey has 28 confirmed cases of E. coli, with Pennsylvania eight and Delaware one, the CDC said. New York has 19 confirmed cases and South Carolina and Utah have one each. The South Carolina patient ate in New Jersey, said New Jersey Department of Health and Senior Services spokesman Tom Slater.
New Jersey has 55 probable cases, New York’s Nassau and Suffolk counties have 54 and 13, and New York City three, according to local health officials.
California health officials said yesterday they won’t investigate farms or suppliers for E. coli until federal agencies formally link the Taco Bell outbreak to the state.
“There is no specific California connection to date,” said Kevin Reilly, deputy director of prevention services of the California Department of Health Services.
McLane Foodservice Earlier this week, officials from the U.S. Food and Drug Administration and New Jersey visited the facilities of one of Taco Bell’s primary food distributors, McLane Foodservice Inc. McLane, a unit of Berkshire Hathaway Inc., is the sole distributor of all ingredients, including cheese, meat items and produce, for Taco Bell restaurants in New Jersey, Pennsylvania, Delaware and New York’s Long Island.
Ready Pac Foods Inc., an Irwindale, California-based distributor, supplied McLane. The company said it had halted packing green onions for Taco Bell.
A lawsuit was filed against Taco Bell on Dec. 6 in state supreme court in Suffolk County, New York. Tyler Vormittag, 11, became ill after eating at a Taco Bell in Riverhead, New York, on Nov. 24, said attorney Andrew Siben. The suit is seeking unspecified monetary damages. The boy was hospitalized for a day and a half after he became sick.
Taco Bell restaurants in the U.S. Northeast represent about 6 percent of the chain’s U.S. restaurant base and slightly less than 2 percent of Yum’s total U.S. store count, according to Omohundro.
The illness affected the first person Nov. 20, and the last occurrence was Dec. 2, the FDA said.
Green onions have caused food poisoning in the past. In 2003, three people died and more than 600 people were sickened after an outbreak of hepatitis A caused by contaminated green onions. The illnesses were largely related to tainted onions served by a Chi-Chi’s Mexican restaurant in Pennsylvania.
The Taco Bell incidents also follow at least three U.S. deaths in October stemming from an outbreak of E. coli tied to California spinach.
E. coli is a bacterium normally found in animal and human digestive tracts. The O157:H7 strain produces a poison called Shiga toxin that causes bloody diarrhea and can lead to kidney failure and death. Symptoms generally appear within eight days, according to the CDC.
