Earnings Preview: What to Expect When Tim Hortons Inc Reports This Week

Can Tim Hortons Inc (TSX:THI)(NYSE:THI) deliver for shareholders this quarter?

| More on:
The Motley Fool

Tim Hortons Inc (TSX: THI)(NYSE: THI) is scheduled to report its quarterly earnings on Wednesday. While the company remains the No. 1 coffee and doughnut chain in Canada, investors are worried that its business concept is going stale. Let’s take a peek at what has been happening at the company over the past few months and what we’re likely to see in the upcoming report.

Stats on Tim Hortons

Analysts’ EPS Estimate $0.87
Year-Ago EPS $0.81
Revenue Estimate $843.77M
Change From Year-Ago Revenue 5.5%
Earnings Beats in Past Four Quarters 2

Source: Yahoo! Finance

Can Tim Hortons continue to grow?

Analysts have been steadfast in their views on the company’s earnings in recent months, only raising their consensus profit estimate for the upcoming quarter by a penny. The stock has been trading flat in lock-step, up only 2% since late May.

It was around that time that Tim Hortons celebrated its 50th anniversary. On May 17, 1964, the original ‘Tim Hortons restaurant opened its doors in Hamilton, Ontario. Today, the chain is now a fixture of Canadian culture. A study from marketing research company Ipsos Reid found that Tim Hortons ranked as the sixth most influential brand in the country last year.

However, beneath the celebration, there are growing worries that the Tim Hortons expansion has run its course. With more than 3,600 restaurants across Canada, the company has exhausted most of its obvious expansion avenues. Efforts to branch out in the United States have been mixed so far.

Competitors are also looking to steal a chunk of the market. Starbucks Corporation has spent years heading an ambitious Canadian rollout, chasing high-margin customers who prefer cappuccinos and lattes. Meanwhile, McDoanld’s Corporation began to lure more cost-conscious coffee drinkers with cheap drinks and promotional giveaways.

Chief Executive Marc Caira’s job is to convince investors that the company still has a long growth runway ahead of it. Over the next five years, Caira sees room for more than 500 new locations across Canada — primarily smaller kiosks and captive audiences like sport stadiums and hospitals. Management is also planning an expansion into new markets, namely the Middle East and the U.S. midwest.

Tim Hortons is also defending its home turf from rivals through store renovations and new product launches. The company is also trying to squeeze more sales out of existing stores by encouraging customers to opt for three or four items with each order, rather than one or two. These efforts have already provided a material boost to same-store sales.

In its upcoming report, be sure to watch the progress of these growth initiatives closely. Are customers purchasing more food items with each order? Are U.S. customers starting to buy into the Tim Hortons concept? Commentary in this upcoming conference call could provide a glimpse of the company’s earnings prospects for many quarters to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. David Gardner owns shares of Starbucks. Tom Gardner owns shares of Starbucks. The Motley Fool owns shares of Starbucks.

More on Investing

Stock analysts were once excited about construction company Aecon as an investment.
Coronavirus

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Should You Buy Bank Stocks Now?

Canadian bank stocks are getting cheap. Is this the right time to buy?

Read more »

stock data
Stocks for Beginners

2 Reliable Stocks Beginners Can Buy Amid the Market Selloff

As the broader market turmoil continues, new investors can buy these two reliable dividend stocks to get good returns on…

Read more »

Biotech stocks can be good yet risky investments.
Coronavirus

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Piggy bank next to a financial report
Investing

Do You Have Cash Sitting in Your TFSA? Now Is a Great Time to Buy Stocks

If you have cash in your TFSA that you're looking to invest, now is a great time to buy high-quality…

Read more »