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Analysts say profits from overseas and other restaurants will help boost parent company’s figures.
NEW YORK — The E. coli outbreak linked to Taco Bell may chomp away at quarterly sales of the fast food chain’s parent company, but analysts say the woes will recede and that profit from overseas and other eateries will help fatten next year’s figures.
Bear Stearns analyst Joseph Buckley said Wednesday that Taco Bell’s same-store sales, or sales in stores open at least one year, a key measure of industry performance, could fall by about 20 percent for the last four weeks of the fourth quarter, and reduce earnings by about 4 cents per share.
Buckley estimated that fourth-quarter sales from Taco Bell would be $26 million less than originally estimated, and franchise revenue would be $4 million lower than estimates. Taco Bell is a subsidiary of Louisville, Ky.-based Yum Brands Inc.
“Taco Bell is still a big piece of Yum, but growth coming from China and other international markets will mitigate some of the impact,” Buckley said.
For 2007, Yum — which also operates KFC, Pizza Hut and other fast-food chains — will get half of its earnings from international markets, and half in the U.S., where Taco Bell comprises 50 percent of sales, Buckley said.
Outbreaks occurred in the Northeast, which is a lightly penetrated market, Buckley said. While it might take three to six months for that area to bounce back from the outbreak, “across the nation, sales will bounce back faster than that,” he said.
Buckley lowered his 2006 earnings-per-share estimate to $2.86 from $2.90, but did not change his 2007 estimate.
Morningstar equity analyst John Owens said sales will be hurt “as long as this story continues to be in the headlines or TV.”
“Once it starts to fade from the headlines I fully expect Taco Bell to make a comeback from this,” he added.
He compared the situation to the 2005 false claim of a woman who said she found part of a finger in a bowl of a chili at a Wendy’s restaurant, and previous consumer fears over mad cow disease and avian flu.
The recent outbreak of E. coli has sickened 67 people who ate in Taco Bell restaurants in New Jersey, New York, Pennsylvania and Delaware. The cause of the outbreak, initially thought to be green onions, is still under investigation.
“These sorts of things, while stories are being reported on, some consumers are reluctant to frequent the affected chains, but consumers have short memories,” Owens said. “I don’t expect this to impact the long-term intrinsic value of the company.”
Taco Bell spokesman Will Bortz said the company had no estimate on how the outbreak will affect sales or earnings.
The company’s shares gained 62 cents, or 1 percent, to close at $58.60 on the New York Stock Exchange.